How Are Bonuses Taxed?

Tax withholding rules mean a portion of your bonus won’t make it into your bank account.

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(Image credit: Getty Images)

For some fortunate workers, a new year means a bonus is coming. That can be good news since some companies are cutting budgets, laying off workers, or scrapping bonus pay or salary increases altogether. 

However, people are often surprised when the amount they receive from an announced bonus is much less than expected. That situation — where a big chunk seems missing from your bonus pay — is due to federal tax withholding and so-called bonus tax rates.

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Kelley R. Taylor
Senior Tax Editor,

As the senior tax editor at, Kelley R. Taylor simplifies federal and state tax information, news, and developments to help empower readers. Kelley has over two decades of experience advising on and covering education, law, finance, and tax as a corporate attorney and business journalist.