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HOW BONUSES ARE TAXED CALCULATOR

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 * Written by TurboTaxLisa
 * Modified Jul 29, 2022
 * 1 min read

If you received a bonus you may want to understand, “how taxes are withheld from
your bonuses when you receive them?”

At the time of receipt of your bonus, federal taxes are typically withheld by
your employer at a higher tax rate than your actual tax rate used when you file
your taxes. But don’t worry, since your actual tax rate based on your total
taxable income for the year could be lower, you may get back some of what was
withheld from your bonus as part of your federal tax refund.

Employers typically use either of two methods for calculating federal tax
withholding on your bonus: the aggregate method or the percentage method. 
Generally most employers chose to use the percentage method. Under tax reform,
the federal tax rate for withholding on a bonus was lowered to 22%, down from
the federal income tax rate of 25%.

Check out our updated bonus calculator that answers one of our most frequently
asked questions and get an estimate of how much federal taxes will be withheld
from your bonuses when you receive them.


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WRITTEN BY LISA GREENE-LEWIS

Lisa has over 20 years of experience in tax preparation. Her success is
attributed to being able to interpret tax laws and help clients better
understand them. She has held positions as a public auditor, controller, and
operations manager. Lisa has appeared on the Steve Harvey Show, the Ellen Show,
and major news broadcast to break down tax laws and help taxpayers understand
what tax laws mean to them. For Lisa, getting timely and accurate information
out to taxpayers to help them keep more of their money is paramount. More from
Lisa Greene-Lewis

Follow Lisa Greene-Lewis on Twitter.


27 RESPONSES TO “HOW BONUSES ARE TAXED CALCULATOR”


 1.  Mr. H says:
     January 24, 2015 at 12:02 pm
     
     This year I received a one-time bonus, a severance package, a vacation buy
     out, relocation assistance, a signing bonus, and an annual Manager
     Incentive Plan bonus. This totaled $187K above my normal salary.
     
     Of these sources of supplemental wages, the only one I expect to see again
     is the annual MIP bonus (~$20K annually).
     
     Uncle Sam took me to the cleaners (at least what has been withheld). How do
     I income average over 5 years in Turbo Tax so that I’m not taking as big of
     a hit this year, and does it even make a difference?
     
     My base salary is about $125K.
     
     
     
 2.  andy says:
     December 31, 2014 at 2:29 pm
     
     Alison, Matt & Patrick Nguyen are correct. There are a lot of misleading
     blog-posts out there, especially by Intuit, that lead people to believe,
     that, supplemental income such as bonus checks are taxed differently than
     regular wages. It’s the WITHHOLDING, not the actual tax liability. Look at
     a 1040 or a W2. Is there a box for bonus/supplemental income? The net
     amount in your pocket will be the same either way – after you file your
     return. That does not suggest that you should ignore choosing the more
     ideal method of withholding calculation for your individual tax situation
     to keep from giving Uncle Sam an interest free loan.
     
     
     
 3.  Patrick Nguyen says:
     December 17, 2014 at 5:55 pm
     
     The wording in the bonus calculator is incorrect. It says that bonuses “may
     be taxed at a higher rate” or “will be taxed at a flat 25% rate.” This is
     incorrect. The TAX WITHHOLDING is different, but the actual TAX is
     calculated when the return is filed.
     
     
     
 4.  Larry says:
     August 19, 2014 at 9:49 am
     
     Hello,
     I earn $250K annually (w2) and received a $80,000 contract signing bonus. I
     am told my net bonus will only be $42,266 after taxes. This seems wrong to
     me.
     I live in New York State.
     
     
     * Frank says:
       March 16, 2015 at 10:23 am
       
       Larry,
       Welcome to NYS. Highest taxes lowest wages…
       
       
       
     
 5.  Phi Lieu says:
     July 24, 2014 at 7:40 am
     
     My employee claim exempt and have the bonus payout. Should we withhold as
     flat rate for tax?
     
     
     
 6.  Angela says:
     May 29, 2014 at 8:17 am
     
     Hello!
     I am a school teacher at a school that is closing. The school will be
     paying out my entire summer pay in one check. I am concerned that the tax
     withholding will eat into the funds that I need to sustain my household. I
     am in the 25% tax bracket in my pay. The lump payment will be for an entire
     month’s pay (two payments). What would be a “safe” amount to increase my
     deductions to for this payment??
     
     
     
 7.  TurboBonuQ says:
     April 20, 2014 at 8:08 pm
     
     Hi, I will receive a relocation bonus $20K from future employer. I have an
     option to get that bonus now (currently live in CA) or later (when I will
     move to WA) – the employer is in WA. Does it make sense to wait till I move
     to WA before accepting the bonus (in terms of paying less state tax)? For
     purpose of this calculation we can use annual base salary at $160K+
     (excluding this bonus, etc.)… Please advice! Thanks in advance
     
     
     
 8.  CHARLES PEARL says:
     January 17, 2014 at 3:06 pm
     
     Please this is my first time am filing, i only want to put my Wages and
     Federal Tax W/H…. I don’t want to include Soc Sec Wages and Medicare Tax
     W/H… Hope it won’t stop my payment..
     
     
     
 9.  beck says:
     January 14, 2014 at 7:42 am
     
     Can I claim the money that I have sent to a relative that is in TDC ?
     
     
     
 10. Robert L says:
     December 16, 2013 at 12:25 pm
     
     I purchased a travel trailer in Delaware with a bank loan. I have paid my
     Pennsylvania state sales tax for the purchase. I have been told that if it
     has a bathroom etc it is eligible for a tax deduction is this true ?
     
     
     * TurboTax Mary Ellen says:
       December 27, 2013 at 10:00 am
       
       A travel trailer with a kitchen and a bathroom will qualify as a second
       home, and the loan interest would be deductible as mortgage interest. If
       your loan company does not report the interest on form 1098, TurboTax has
       a box on the screen titled “Tell Us More About Your Loan from …”. Check
       the box “I did not receiva a 1098. Enter the amount of the interest you
       paid on the next screen, then Yes on the Was This a Seller-Financed Loan?
       You can then enter the bank’s information on the next screen. You may
       need to request the bank’s Federal ID number from the bank if it is not
       on any of the paperwork you have from the bank.
       
       Mary Ellen
       
       
       * Robert L says:
         December 30, 2013 at 6:49 am
         
         Thank You
         
         
         
       
     
 11. Stephanie Coy says:
     December 5, 2013 at 12:06 pm
     
     I have a 17 yr old daughter who father has managing conservitorship of
     however she has lived in my home for 2 yrs now. Which i can prove with
     school records and medicaid. Her father hasnt lived in our city in over a
     yr n isnt supporting her finacally at all. He claims he can claim her on
     his 2013 taxes. There is nothing in our court documents stating anything
     regarding taxes. Can i claim her this yr? Or does he have to.?
     
     
     * Sally says:
       December 11, 2013 at 6:44 pm
       
       You should have all rights to claim her. she lives with you. do your
       taxes before him and once he does his taxes, he wont be able to claim her
       cause you already did. good luck
       
       
       
     
 12. John Aldridge says:
     November 18, 2013 at 9:33 am
     
     I am 63 and thinking of retiring next year and have a small annuity
     ($20,000) which has been tax deferred. How will it affect my taxes if I
     withdraw it all to pay off a couple of bills so I will be debt free?
     
     
     * TurboTaxLisa says:
       November 25, 2013 at 1:50 pm
       
       Hi John,
       You will be taxed on the amount withdrawn and it will be added to any
       other income. If your contributions to the plan were included in your
       gross income before, then part of the distributions may be excluded from
       income. Here is more information on the taxation of pensions and
       annuities
       http://www.irs.gov/taxtopics/tc411.html
       Thank you,
       Lisa Greene-Lewis
       
       
       
     
 13. Tom Fitzpatrick says:
     November 15, 2013 at 3:51 am
     
     Will I be able to claim my son this year? He moved to Florida in May
     
     
     * TurboTaxLisa says:
       November 25, 2013 at 1:24 pm
       
       Hi Tom,
       Whether you can claim your son depends on a few key factors:
       -Age
       -Support
       -Residency
       -Relationship
       Please read more information here
       http://blog.turbotax.intuit.com/2013/11/22/who-qualifies-as-a-dependent-on-your-tax-return/
       Thank you,
       Lisa Greene-Lewis
       
       
       
     
 14. Susan Rees says:
     November 15, 2013 at 1:45 am
     
     We received a lease bonus check from Gas and Oil company of 60 thousand,
     does this just get added to our yearly income? How much tax would I expect
     to pay on $60.000, when our family only makes 30,000 a year with one
     dependent under age of 17, Thank you.
     
     
     * TurboTaxLisa says:
       November 25, 2013 at 1:19 pm
       
       Hi Susan,
       Your lease bonus check would be added to your total yearly income. You
       should receive a 1099-misc. I don’t know all of your tax deductions to
       determine your taxable income, but you would be taxed at a higher tax
       rate based on both your regular income and the lease bonus income. Please
       see this article for 2013 tax rates
       https://turbotax.intuit.com/tax-tools/tax-tips/IRS-Tax-Return/2013-Federal-Tax-Rate-Schedules/INF12044.html
       Thank you,
       Lisa Greene-Lewis
       
       
       
     
 15. sharee pilgreen says:
     November 14, 2013 at 6:07 pm
     
     Is this true?
     
     
     
 16. Trina says:
     November 14, 2013 at 1:25 pm
     
     Would love to see a calculator for the opposite. Ie., you received regular
     monthly or quarterly bonuses. How much will you get back if your employer
     uses the aggregate method and your tax rate for each bonus period was
     significantly higher than your regular tax rate?
     
     
     
 17. lori says:
     November 14, 2013 at 9:21 am
     
     I get paid every 2 weeks
     
     
     
 18. lori says:
     November 14, 2013 at 9:20 am
     
     ?
     
     
     
 19. Alison says:
     November 14, 2013 at 8:09 am
     
     Way to go for perpetuating the myth that bonuses are taxed differently than
     regular income. The word you are looking for is “withheld,” not taxed.
     
     
     * Matt says:
       May 13, 2014 at 10:56 am
       
       Great point Alison. Your Tax is the same with either method. The
       difference is just how much you owe or get in a refund at the end of the
       year. The Aggregate method is the best way for you to end up owing a
       small amount. This is the ideal situation for most people.
       
       It really is bad advice to suggest that the flat 25% is somehow good for
       people or might save them something.
       
       
       
     




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