How Are Bonuses Taxed in 2024? Understanding Your Bonus Paycheck
Bonuses are considered supplemental wages by the IRS and are typically taxed differently than regular income. Employers usually use one of two methods to calculate bonus taxes:
Percentage Method (Most Common for Bonuses):
- • Flat 22% federal tax rate for bonuses under $1 million
- • 37% federal tax rate for bonuses over $1 million
- • Plus mandatory Social Security (6.2%) and Medicare (1.45%) taxes
- • State taxes vary by location (some states don't tax bonuses)
Aggregate Method (Combined with Regular Paycheck):
- • Bonus is added to your regular paycheck amount
- • Taxes calculated on the combined total as if it were a normal paycheck
- • Often results in higher withholding than the percentage method
Key Facts About Bonus Taxes in 2024:
- • Bonus taxes are withheld at a higher rate but taxed at your normal income tax rate when you file
- • You may get a tax refund if too much was withheld from your bonus
- • Some states (like California and Pennsylvania) tax bonuses as regular income
- • Supplemental wages over $1 million are taxed at the highest federal rate (37%)
- • The Social Security tax wage base limit is $160,200 for 2024
Frequently Asked Questions
Why is my bonus taxed so high?
Bonuses have higher withholding rates, but you'll get any over-withholding back when you file your tax return. The actual tax rate is your normal income tax rate.
Can I request a different withholding method?
Some employers may allow you to request additional withholding adjustments using Form W-4, but the basic withholding methods are determined by IRS rules.