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Supplemental wages were taxed at a flat 25% tax rate in 2017 and will be taxed at a flat rate of 22% in 2018, provided the bonus is under $1 million. For many employees, this 22% or 25% flat rate is much higher than the typical withholding rate.

Why Did My Bonus Check Get Taxed 40%? These bonuses, although supplemental to a person's regular income, are taxed like regular income. For people in higher tax brackets, this can mean that as much as 40 percent of a person's bonus will be withheld from the bonus check before it is issued.

The $500,000 you received over $1 million is subject to withholding at the rate of the highest tax bracket that year, 37% as of 2019. That's another $185,000 that goes directly to the IRS. Your total withholding on that $1.5 million works out to $405,000: the 22% rate ($220,000) plus the 37% rate ($185,000).

The Percentage Method: The IRS specifies a flat supplemental rate of 25%, meaning that any supplemental wages (including bonuses) should be taxed in that amount. If you receive a $5,000 bonus, under this rule, $1,250 (25% of $5,000) goes straight to the IRS.

And because of the way bonuses are initially taxed, you might see a higher-than-normal withholding when you receive that extra pay. In general, the federal supplemental tax rate of 22 percent applies, plus Social Security, Medicare, unemployment and your applicable state and local taxes.

While bonuses are subject to income taxes, they don't simply get added to your income and taxed at your top marginal tax rate. Instead, your bonus counts as supplemental income and is subject to federal withholding at a 22% flat rate.

While bonuses are subject to income taxes, they don't simply get added to your income and taxed at your top marginal tax rate. Instead, your bonus counts as supplemental income and is subject to federal withholding at a 22% flat rate.

Let's find out. The Percentage Method: The IRS specifies a flat supplemental rate of 25%, meaning that any supplemental wages (including bonuses) should be taxed in that amount. If you receive a $5,000 bonus, under this rule, $1,250 (25% of $5,000) goes straight to the IRS.

There is no such thing as a supplemental tax rate. Bonuses are taxed at ordinary income rates. Part of the reason why this myth persists is because bonuses and other types of supplemental income are subject to different rates of withholding. ... Bonuses are taxed at your ordinary income rate.

And because of the way bonuses are initially taxed, you might see a higher-than-normal withholding when you receive that extra pay. In general, the federal supplemental tax rate of 22 percent applies, plus Social Security, Medicare, unemployment and your applicable state and local taxes.

For example, if your bonus or commission is included in your regular pay, then it's taxed according to normal federal and state withholding. If you receive it outside your regular paycheck, then it becomes supplemental and your commission is taxed at a rate of 25%.

Maximize your 401(k) contribution. Taxes on 401(k) contributions are deferred until you withdraw the money. ... Contribute your bonus to a traditional IRA. ... Pay up to the contribution limit on your health savings account. ... Request a deferred compensation plan.

The state as a whole has a progressive income tax that ranges from 4.00% to 8.82%, depending on an employee's income level and their W-4 allowances. There is also a supplemental withholding rate of 9.62% for bonuses and commissions. In New York state, an employee's tax burden can also vary based on location.

Overview of New York Taxes New York City's income tax system is also progressive and rates range from 3.078% to 3.876%. Most people claim 0-5 allowances, check W-4 rules for details. You can't withhold more than your earnings. Please adjust your .