How to Calculate Bonus Pay: Withholding, FICA & Net

The short answer

To calculate bonus pay, start with the gross bonus, subtract federal withholding, subtract state withholding, and subtract FICA — Social Security at 6.20% on the part of the bonus below the annual wage base, plus Medicare at 1.45% on the whole bonus. What is left is the net bonus, the amount that actually reaches your bank account. For a $5,000 bonus at 22% federal, 5% state and full FICA, that is $5,000.00 minus $1,100.00 minus $250.00 minus $382.50, which leaves $3,267.50.

The reason this surprises people is that a bonus is not taxed like a normal paycheck. Employers usually withhold federal tax on supplemental wages at a flat 22%, rather than at the rate your regular pay is withheld at. That 22% is withholding, not your final tax bill, and the difference between withholding and final tax is the single most useful thing to understand about bonus pay.

Step 1: Start with the gross bonus

The gross bonus is the lump sum your employer awards, before anything is taken off. It is not your salary, not your hourly rate times hours, and not the amount on the offer letter after tax — it is the headline number, here $5,000. Find it on your bonus letter or your payslip, where it usually appears as a separate supplemental-wages line. If your bonus is described as a percentage of salary, multiply first: a 10% bonus on a $50,000 salary is a $5,000 gross bonus, and that $5,000 is where this calculation starts.

Step 2: Take off federal withholding

Multiply the gross bonus by the federal withholding rate and divide by 100. At the common flat supplemental rate of 22%, a $5,000 bonus gives $5,000 times 22 divided by 100, which is $1,100.00. Some employers instead withhold at your regular marginal rate, so if your marginal rate is 12% or 24%, the federal take is $600 or $1,200 instead. The calculator on this site lets you type either rate, and the difference is worth checking: the same bonus nets $3,500 at a 17.35% federal rate, $25 more for every half-point the rate falls.

Step 3: Take off state withholding

Multiply the gross bonus by your state withholding rate and divide by 100. At 5%, a $5,000 bonus gives $250.00. States differ widely here, and some states have no income tax at all — in that case the state line is zero and the same bonus nets $3,517.50 instead of $3,267.50. If you work in one state and live in another, check which state your employer withholds for; the rate on your payslip is the authority, not a national average.

Step 4: Take off FICA, in two parts

FICA has two pieces, and only one of them ever stops. Social Security is 6.20% of the part of the bonus that falls below the annual Social Security wage base, given your year-to-date wages. Medicare is 1.45% of the whole bonus, with no cap. On the defaults — $60,000 already earned this year and a $200,000 wage base — the whole $5,000 bonus is below the base, so Social Security is $310.00 and Medicare is $72.50, for a FICA total of $382.50.

Near the wage base the picture changes. If you have already earned $199,000 against a $200,000 base, only $1,000 of the $5,000 bonus is Social Security-taxable, so Social Security falls to $62.00, FICA falls to $134.50, and the net rises to $3,515.50. That is not a trick or a loophole; it is how the cap is designed to work. The additional 0.9% Medicare tax on high earners is a separate item that this simple calculation leaves out, so very high earners should treat the FICA line as approximate.

Step 5: Subtract everything from the gross

Net bonus equals gross bonus minus federal withholding minus state withholding minus FICA. For the headline example: $5,000.00 minus $1,100.00 minus $250.00 minus $382.50 equals $3,267.50. That is 65.35% of the gross, which is a useful rule of thumb at these rates: roughly a third of a bonus goes to withholding, and roughly two thirds reach you. Working backwards is just as easy. To net $4,000 at the same rates, divide $4,000 by 0.6535, which gives a gross bonus of $6,120.89. To keep the net at or below $3,000 in whole $100 steps, the largest gross bonus is $4,500, which nets $2,940.75, while $4,600 would net $3,006.10 and overshoot.

Withholding is not your final tax

This is the part to carry away. The 22% federal withholding on a bonus is an advance payment against the tax you will actually owe when you file. If your real marginal rate is below 22%, the excess comes back as part of your refund. If it is above 22%, you may still owe more at filing time. The same logic applies to state withholding. So a bonus that nets $3,267.50 on the payslip may really be worth more or less after your return is filed, depending on your total income, filing status, deductions, and state rules. The calculator gives you the payslip number, not the tax-return number, and confusing the two is the most common bonus mistake.

Common mistakes

The first mistake is treating the gross as the net — spending the $5,000 before the $1,732.50 of withholding is taken off. The second is assuming the 22% rate is fixed: it is the common supplemental rate, but your employer may use your marginal rate instead, and the difference is hundreds of dollars. The third is forgetting the wage base: late in the year, a bonus can be nearly Social Security-free, which is a genuine windfall worth checking rather than assuming. The fourth is forgetting that retirement contributions, local taxes, and other deductions can also come off a bonus before it reaches you. Check the payslip lines one by one against this calculation, and any line that does not match is worth a question to payroll.

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