Withholding is not final tax
For a separately identified supplemental payment, this calculator applies 22% federal income-tax withholding through $1 million of annual supplemental wages from the employer and 37% above that threshold. It separately estimates the payment's ordinary income tax by stacking it on your other taxable income.
2026 payroll-tax treatment
Employee Social Security withholding is 6.2% up to the $184,500 wage base. Medicare withholding is 1.45% without a wage cap, plus 0.9% employer withholding when that employer's Medicare wages exceed $200,000.
Official IRS sources
IRS Publication 15 (2026) defines supplemental wages, withholding methods, payroll-tax rates, and the 2026 Social Security wage base. IRS Publication 505 (2026) explains supplemental-wage withholding from the employee perspective.
Important limitations
- Assumes separately identified supplemental wages and the optional flat-rate method; aggregate-method withholding is not modeled.
- Excludes state and local tax, deductions, credits, spouse wages, special compensation arrangements, retirement deferrals, and benefit deductions.
- The Additional Medicare amount shown is employer withholding based on the $200,000 wage threshold; final liability uses filing-status rules and can differ.
Frequently asked questions
Are bonuses taxed at a special final rate?
No. A bonus is generally ordinary wage income. The 22% rate is a federal withholding method, not necessarily the final income-tax rate on your return.
Is severance pay subject to payroll tax?
Generally, severance is treated as supplemental wages and is subject to federal income-tax withholding, Social Security, and Medicare taxes.
Why might my employer withhold more or less?
An employer may use an aggregate method when supplemental wages are combined with regular wages. Elections, payroll timing, prior wages, and state or local withholding can also change the check.