Are Commissions Taxed Differently? How Commission Is Taxed and Withheld
Commissions are taxed like salary, but withheld differently. How the 22% supplemental rate works, why commission checks can look over-taxed, and how 1099 commissions are taxed.
Quick Answer
No. Commissions are taxed as ordinary income at the same rates as salary. What differs is withholding: the IRS treats commissions and bonuses as supplemental wages, so an employer can withhold federal income tax at a flat 22% (37% on supplemental wages over $1 million in a year) instead of using your regular withholding. Social Security (6.2% up to $184,500 for 2026) and Medicare (1.45%) apply as usual. When you file, commissions are added to the rest of your income and taxed at your normal rates. See what is withheld from a check with our free bonus and commission tax calculator.
Why Commission Checks Can Look Heavily Taxed
Employers can withhold on supplemental wages in two ways. With the flat-rate method, 22% federal is withheld. With the aggregate method, the commission is added to a regular paycheck and withholding is calculated as if you earned that much every pay period, which can push withholding higher. Either way, withholding is an estimate. If too much is withheld, you get it back as a refund when you file.
Worked Example
A W-2 rep receives a $5,000 commission check, has earned $60,000 so far this year, and lives in a state with no income tax. Using the flat-rate method:
- Federal income tax: $5,000 x 22% = $1,100
- Social Security: $5,000 x 6.2% = $310
- Medicare: $5,000 x 1.45% = $72.50
- Take-home: $3,517.50
Commissions for 1099 Contractors
Independent contractors have nothing withheld. They pay income tax plus self-employment tax (15.3% on 92.35% of net earnings) themselves, usually through quarterly estimated payments. Estimate it with the 1099 tax calculator.
Tips for Commissioned Employees
- Check your Form W-4 if large commission checks leave you over- or under-withheld for the year.
- Remember that state withholding on supplemental wages varies by state.
- Keep commission statements so you can reconcile what was paid and withheld.
Sequifi runs payroll and commissions together, so supplemental wages are withheld correctly for W-2 employees and 1099 contractors are paid without withholding. See payroll processing.
Frequently Asked Questions
Are commissions taxed differently than salary?
Not in the tax you ultimately owe. Commissions are ordinary income. Only withholding differs: employers may withhold federal tax on commissions at a flat 22%.
What is the federal tax rate on commission checks?
For 2026, the optional flat withholding rate on supplemental wages is 22%, or 37% on supplemental wages over $1 million in the year. Your actual tax depends on your total income.
Why is my commission check taxed so much?
Your employer may use the aggregate method, which withholds as if you earned that commission every pay period. Excess withholding is refunded when you file.
Do commissions count toward Social Security tax?
Yes. Commissions are wages subject to 6.2% Social Security up to the annual wage base ($184,500 for 2026) and 1.45% Medicare.
Are 1099 commissions taxed differently?
Contractors pay the same income tax rates but also pay self-employment tax, and nothing is withheld, so they usually make quarterly estimated payments.
Sources
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