A $5,000 bonus that lands as $3,900 in your bank account feels like a gut punch — a 22% haircut right off the top, sometimes more once state tax and FICA are factored in. But that 22% is a withholding rate, not your actual tax rate. What actually happens to your bonus at tax time is a completely separate question, and for a lot of people, the answer is better news than the paycheck made it look.
Supplemental wages get a shortcut, not a special tax
The IRS classifies bonuses, along with commissions and certain other one-time payments, as "supplemental wages." Rather than running that payment through your regular paycheck's W-4-based withholding tables — which would require the payroll system to guess how a lump sum affects your annual totals — the IRS allows employers to use a simple flat percentage instead: 22% withheld on supplemental wages up to $1 million in the calendar year, jumping to 37% on any amount above that. This is purely a WITHHOLDING mechanism, a way to estimate and collect tax upfront. It has no bearing on what your bonus is actually taxed at once your full year's income is totaled up.
What your bonus is actually taxed at
At tax time, your bonus doesn't get its own separate tax calculation at all — it simply adds to your total income for the year and gets taxed at your normal marginal rate, exactly like the next dollar of your regular salary would be. If your marginal tax bracket for the year is 12%, but 22% was withheld from your bonus, you effectively overpaid by 10 percentage points on that bonus — money you get back as part of your refund. If your marginal bracket is 32%, the 22% withheld undershoots what you'll actually owe, and you'll need to cover that gap either through your regular paycheck's withholding or at filing.
A worked example
A worker with a $60,000 salary, comfortably in the 12% federal bracket, receives a $5,000 year-end bonus. Their employer withholds 22% federal ($1,100) plus 7.65% FICA ($382.50), leaving a $3,517.50 net bonus in their paycheck. But at tax time, since their marginal rate is only 12%, their actual federal tax on that $5,000 bonus is roughly $600 — meaning the $1,100 withheld overshot by about $500, which comes back as extra refund. The paycheck felt like a 22%+ hit; the real cost, once the dust settles, was closer to 12%.
Common mistakes
The biggest mistake is assuming the withheld amount IS the tax — it's an estimate, not a final answer, and for most people below the top brackets, it overshoots. The second is not accounting for the aggregate method: some employers combine your bonus with a regular paycheck instead of using the flat 22%/37% rates, which can withhold noticeably more for that one pay period since it can temporarily push the combined amount into a higher withholding bracket. The third is forgetting FICA still applies in full — Social Security and Medicare withholding on a bonus works exactly like it does on regular wages, with no special treatment.