1. What is Bonus Tax?

Bonus tax refers to the supplemental withholding rate applied to bonus payments. In many countries like the US, bonuses are considered supplemental wages and may be taxed at different rates than regular income.

2. How Bonus Tax is Calculated

The basic formula for calculating bonus tax is:

Where:

• \( Bonus \) — The gross bonus amount before taxes
• \( Supplemental\ Tax\ Rate \) — The applicable tax rate for bonus payments (as percentage)

3. Supplemental Tax Rates

US Rates: The IRS has two methods for withholding on supplemental wages:

• Flat Percentage Method: 22% federal tax rate (37% for bonuses over $1 million)
• Aggregate Method: Bonus added to regular paycheck and taxed at regular income tax rate

Note: State taxes and other deductions may also apply.

4. Using the Calculator

Instructions: Enter your gross bonus amount and the applicable supplemental tax rate (22% is common in the US for bonuses under $1 million). The calculator will show the tax amount and your net bonus after taxes.

5. Frequently Asked Questions (FAQ)

Q1: Why are bonuses taxed differently?
A: Bonuses are considered supplemental wages and may be subject to different withholding rules than regular wages.

Q2: Is the bonus tax rate the same as my income tax rate?
A: Not necessarily. The flat supplemental rate might be different from your marginal tax rate.

Q3: Can I get some bonus tax back when I file my return?
A: Yes, if too much was withheld, you may get a refund when you file your annual tax return.

Q4: Are there ways to reduce bonus taxes?
A: Some options include deferring the bonus to another year, contributing to retirement accounts, or charitable giving, but consult a tax professional.

Q5: Do all countries tax bonuses the same way?
A: No, tax treatment of bonuses varies by country. Some treat them as regular income while others have specific rules.