How bonuses and commissions are taxed
The IRS treats bonuses and commissions as supplemental wages. They are taxed as ordinary income, the same as salary, but your employer can withhold federal income tax on them at a flat rate instead of running them through your normal withholding. For 2026, that flat rate is 22%, rising to 37% on supplemental wages above $1 million in the year.
Social Security and Medicare apply too. Social Security is 6.2% of wages up to $184,500 for 2026. Medicare is 1.45% with no cap, plus an Additional Medicare Tax of 0.9% that employers withhold once your wages for the year pass $200,000.
Worked example
A $5,000 commission check, for a rep who has earned $60,000 so far this year, in a state with no income tax:
- Federal income tax: $5,000 × 22% = $1,100
- Social Security: $5,000 × 6.2% = $310
- Medicare: $5,000 × 1.45% = $72.50
- Total withheld: $1,482.50, so the rep takes home $3,517.50
Why a bonus check can look heavily taxed
Some employers use the aggregate method instead: they add the bonus to a regular paycheck and withhold as if you earned that much every pay period, which can withhold more than 22%. Either way, withholding is an estimate. Your actual tax is worked out on your return, and any over-withholding comes back as a refund.
1099 contractors
Independent contractors have nothing withheld from commission. They pay income tax and self-employment tax themselves, usually through quarterly estimated payments. This calculator is for W-2 employees. If your team mixes both, see how to pay 1099 and W-2 reps.
Paying commissions to a whole team?
Sequifi calculates commissions and runs payroll in one platform, so withholding is handled correctly for W-2 employees and 1099 contractors alike. Try the commission calculator too.
Book a demoFrequently asked questions
How much tax is taken out of a bonus?
If your employer uses the flat-rate method, federal income tax is withheld at 22% for 2026 (37% on supplemental wages over $1 million in the year), plus 6.2% Social Security up to the $184,500 wage base and 1.45% Medicare. State tax may also apply.
Are commissions taxed differently than salary?
No. Commissions are taxed as ordinary income like salary. The difference is in withholding: the IRS treats commissions as supplemental wages, so employers can withhold federal income tax at a flat 22% instead of using your regular withholding.
Why was so much tax taken out of my bonus?
Your employer may have used the aggregate method, adding the bonus to a regular paycheck and withholding as if you earned that amount every pay period. Withholding is an estimate; your actual tax is calculated when you file, and any excess is refunded.
Do I pay Social Security tax on a bonus?
Yes, at 6.2%, until your total wages for the year reach the Social Security wage base, which is $184,500 for 2026. Medicare tax of 1.45% applies to all wages.
How are 1099 commissions taxed?
Nothing is withheld from commission paid to an independent contractor. The contractor pays income tax and self-employment tax on their own, usually through quarterly estimated payments.
Sources: IRS Publication 15 (2026), IRS Topic 560, Additional Medicare Tax. This calculator estimates withholding and is not tax advice.