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How Are Bonuses Taxed? A Quick Explanation - IRS. com The employees total taxable income of $41,000 falls into their usual 12% tax bracket The IRS determines this employee’s total owed taxes based on the 12% rate (instead of the 22% rate used for the bonus), then gets a refund on the bonus since they paid more than they actually owed
Bonus tax rate: How are bonuses taxed? | Fidelity There are ways to reduce the tax impact of your bonus Your boss just delivered the great news: You earned a bonus this year Before you start making plans to spend it, it’s important to understand how that income will get taxed
Bonus tax rate: How bonuses are taxed | Prudential Financial Bonuses are taxed differently than regular income and are considered supplemental wages The IRS has two methods for calculating the tax on bonuses: The percentage method and the aggregate method Bonuses over $1 million are taxed at a higher rate
Bonus tax rate 2025: How bonuses are taxed - Jackson Hewitt What is a bonus? A bonus is compensation received by an employee for services performed, given in addition to an employee's usual compensation, like your salary, according to the IRS And while bonuses are subject to income taxes, the IRS doesn't consider them regular wages Broadly speaking, bonuses are distributed on special occasions, like a holiday, or built into certain compensation plans