Tax guide
How to Use a Bonus & Severance Tax Calculator
How a bonus tax calculator works: the 22% flat supplemental withholding, why it is not your tax rate, and the Social Security and Medicare also taken out.
Quick answer
What this calculator tells you
A bonus tax calculator explains why a bonus arrives so much smaller than its headline. Bonuses and severance are "supplemental wages," and employers typically withhold federal income tax on them at a flat 22% (up to $1 million; 37% above that), separate from your regular paycheck withholding. On top of that come Social Security and Medicare, so the total withheld is well above 22%.
This guide uses the calculator's defaults — a $20,000 bonus, single, with $80,000 of year-to-date wages and other income — to show the withholding and what actually lands in your account. The 2026 Social Security wage base ($184,500) and the 6.2%/1.45% rates are confirmed against the IRS; every figure matches the tool.
Inputs that matter most
Start with documents rather than memory whenever possible. For this calculation, pay particular attention to:
- the bonus or severance amount
- prior supplemental wages this year
- year-to-date Social Security and Medicare wages
- your other taxable income and filing status
Use values that describe the same point in time. Mixing an old balance with a new rate or an annual cost with a monthly figure can make a polished result unreliable.
When this calculator is most useful
Use this tool early enough to improve the decision, but late enough that the inputs are grounded in real information. It is particularly useful when:
- You got a bonus or severance and want to know the take-home.
- You want to see the flat 22% withholding separated from payroll taxes.
- You want to know whether 22% over- or under-withholds for you.
- You want the total withholding rate on a supplemental payment.
It is less useful when the key facts are unknown, the options use different time periods, or the decision turns mainly on eligibility, contract language, taxes, or risks the calculator does not model. In those situations, gather the missing documents first and treat any early result as a rough range.
How the calculation works
The model turns the entered assumptions into a consistent comparison. It does not fill in facts that were not requested, predict changing markets, or reproduce an institution's underwriting system. That boundary matters: mathematical precision is not the same thing as certainty.
The flat 22% is withholding, not your tax rate
The single biggest misunderstanding about bonuses is the 22%. Using the defaults, a $20,000 bonus:
- Flat 22% supplemental income-tax withholding: $4,400.
- It is an estimate collected up front, not your final tax.
- Your bonus is ordinary income, taxed at your real rate when you file.
- Amounts over $1 million are withheld at 37%.
The 22% is a convenience rule for employers, not a statement of what the bonus will ultimately cost you in tax. When you file, the bonus is added to your ordinary income and taxed at your actual marginal rate; the 22% already withheld is credited against that. So the 22% is neither a penalty nor a discount — it is a prepayment that gets trued up, and whether it was too much or too little depends entirely on your bracket.
Payroll taxes come out on top
The 22% is only the income-tax piece; Social Security and Medicare are withheld too. On the defaults:
- Social Security (6.2%, up to the $184,500 base): $1,240.
- Medicare (1.45%, no cap): $290.
- Added to the $4,400 income-tax withholding: $5,930 total.
- Total withholding rate: 29.65% of the $20,000 bonus.
This is why a bonus feels like it loses nearly a third, not 22%: the payroll taxes that come out of every paycheck come out of the bonus too. The Social Security portion stops once your year-to-date wages hit the $184,500 base, so a high earner late in the year may see less SS withheld; the Medicare portion never stops, and an extra 0.9% can apply at high incomes. The take-home here is $14,070 — about 70% of the gross.
The true-up: over- or under-withheld
Because the 22% is a flat estimate, it rarely matches your exact tax — and the difference is settled at filing. On the defaults:
- Flat withholding on the bonus: $4,400.
- Estimated income tax actually owed on it: about $4,400.
- Difference here: about $0 — the 22% happens to match this bracket.
On the defaults the flat rate lands almost exactly on the mark, but that is a coincidence of this income level. For someone whose marginal rate is above 22%, the flat withholding is too low and they will owe the shortfall when they file; for someone below 22%, it is too high and the excess comes back as a refund. The calculator's comparison tells you which case you are in, so a large bonus does not become an April surprise — if 22% under-withholds for you, setting aside the difference now is the prudent move.
Worked example
See the method in context
Take the defaults: a $20,000 bonus, single, with $80,000 of year-to-date Social Security and Medicare wages and $80,000 of other income. Federal income tax is withheld at the flat 22% supplemental rate: $4,400. Social Security is 6.2% ($1,240, since year-to-date wages are below the $184,500 base), and Medicare is 1.45% ($290).
Total withholding is $4,400 + $1,240 + $290 = $5,930, so the net payment is $14,070 — about 70% of the bonus, a 29.65% total withholding rate. Here the estimated income tax actually owed on the bonus is also about $4,400, so the 22% withholding matches and there is no true-up. In a higher bracket, 22% would under-withhold and leave a balance at filing.
After running the base case, change one important input at a time. A less favorable rate, cost, return, income, or holding period shows whether the conclusion is sturdy or depends on a narrow set of assumptions.
Build three scenarios, not one prediction
A single answer can create false confidence. Three deliberately different cases reveal both the likely range and the assumptions that deserve more investigation.
Conservative case
Expect more withheld than 22%. On the defaults, a $20,000 bonus has $5,930 withheld — about 29.65% — once Social Security and Medicare are added to the 22% income-tax withholding.
Expected case
Enter the bonus amount, any prior supplemental wages this year, your year-to-date Social Security and Medicare wages, and your other income and filing status. The calculator returns the withholding, the net payment, and how it compares to your actual tax.
Improved case
Check the true-up. The flat withholding is reconciled on your return, so if 22% over-withholds for your bracket you get it back as a refund; if it under-withholds, you owe the difference. The calculator's comparison flags which way yours leans.
Keep all unchanged inputs identical across the three runs. That discipline makes the comparison explainable and prevents several moving assumptions from hiding what actually changed the answer.
How to read the result
Look beyond the largest number on the screen. Review the breakdown, the time horizon, and any balance or cost that remains at the end of the comparison. Ask whether the result still fits cash flow and whether it changes under a conservative scenario.
The flat 22% withheld from a bonus is a withholding rule, not your actual tax rate — and it is only part of what is taken out, because Social Security and Medicare come out too, so the check is smaller than 22% off suggests. The right next step is to treat the withholding as an estimate that is trued up on your return, and check whether 22% over- or under-withholds for your bracket.
Common mistakes to avoid
- Thinking 22% is the final tax. It is withholding, reconciled on your return.
- Expecting to lose only 22%. Payroll taxes brought the total to 29.65% here.
- Treating the gross bonus as take-home. The net was $14,070 of $20,000.
- Ignoring your bracket. Above 22%, the flat rate under-withholds and you owe more.
- Forgetting state tax. Many states withhold their own supplemental rate too.
- Overlooking the Social Security cap. Near the wage base, less SS is withheld.
Decision checklist
Before acting, work through these questions. A “no” does not automatically reject the option; it identifies where more evidence or a wider safety margin is needed.
- 1Do I understand 22% is withholding, not my final tax rate?
- 2Have I accounted for Social Security and Medicare on top of the 22%?
- 3Is my year-to-date Social Security wage near the annual base (changing the SS withholding)?
- 4Does 22% over- or under-withhold for my actual bracket?
- 5Am I treating the net payment as the real take-home, not the gross bonus?
Key terms in plain English
- Supplemental wages
- Bonuses, severance, commissions and similar pay. Employers commonly withhold federal income tax on them at a flat 22% up to $1 million (37% above).
- Flat 22% withholding
- The federal income-tax withholding on supplemental wages. On the defaults, 22% of $20,000 is $4,400 — a withholding rule, not your tax rate.
- Payroll taxes
- Social Security (6.2% up to the wage base) and Medicare (1.45%). On the defaults, $1,240 + $290 = $1,530 on the $20,000 bonus.
- Total withholding rate
- Everything withheld as a share of the bonus. On the defaults, $5,930 of $20,000 is 29.65% — well above the 22% income-tax piece alone.
Frequently asked questions
How is a bonus taxed?
A bonus is a supplemental wage, and employers typically withhold federal income tax on it at a flat 22% (up to $1 million). On the defaults, that is $4,400 of a $20,000 bonus. But Social Security (6.2%) and Medicare (1.45%) are also withheld, adding $1,530, for $5,930 total — about 29.65% — so the take-home is $14,070.
Is the 22% the actual tax on my bonus?
No. The 22% is a withholding rate, not your final tax rate. Your bonus is ordinary income, taxed at your real marginal rate when you file; the 22% withheld is just an estimate collected up front. If your bracket is above 22%, you may owe more at filing; if below, you may get some back. The calculator compares the withholding to your estimated actual tax to show which way you lean.
Why is so much taken out of my bonus?
Because more than income tax comes out. On the defaults, the $20,000 bonus loses $4,400 to the 22% income-tax withholding plus $1,240 of Social Security and $290 of Medicare — $5,930 in all, a 29.65% total withholding rate. People expecting "22% off" are surprised by the payroll taxes that bring the real deduction closer to 30%.
How much of my bonus will I actually take home?
On the defaults, $14,070 of a $20,000 bonus — the gross minus $5,930 of total withholding. That is about 70% of the bonus. The exact take-home depends on your year-to-date Social Security wages (which can cap the SS portion) and whether additional Medicare tax applies at higher incomes.
Does the 22% over- or under-withhold?
It depends on your bracket. On the defaults, the estimated incremental income tax on the bonus is also about $4,400, so the 22% withholding happens to match — no difference. For someone in a higher bracket, 22% under-withholds and they owe the rest at filing; for someone in a lower bracket, it over-withholds and they get a refund. The calculator shows the gap for your inputs.
Is severance taxed like a bonus?
Yes — severance is a supplemental wage, so the same flat 22% federal income-tax withholding (37% above $1 million) and the same Social Security and Medicare apply. On the defaults, a $20,000 severance would be withheld exactly like the $20,000 bonus: $5,930 total, $14,070 net. The reconciliation at filing works the same way too.
What does the bonus tax calculator not account for?
State income tax withholding (many states have their own supplemental rate), the aggregate withholding method some employers use instead of the flat rate, 401(k) or benefit deductions from the bonus, and the exact additional Medicare tax rules. It estimates federal withholding and the take-home. Treat it as a close estimate, and remember the final tax is settled on your return.
Source and editorial note
For current background, review IRS: topic no. 751, Social Security and Medicare withholding rates. Official rules and product documents control when they differ from this educational explanation.
Need help with unfamiliar language? Use the financial calculator glossary for definitions and links to related tools.
Prepared by Loan Lyze Editorial under our editorial policy. This article explains a calculator; it is not financial, tax, legal, insurance, or investment advice.