Calculate federal and state taxes on supplemental wages including bonuses, commissions, severance, and overtime. Federal flat 22% or 37% over $1M.
Supplemental wages are payments made to employees outside of their regular salary or hourly pay. The IRS classifies bonuses, commissions, overtime pay, severance pay, back pay, retroactive pay increases, taxable fringe benefits, and certain prizes as supplemental wages, each subject to special withholding rules.
For federal purposes, employers may withhold at a flat 22% rate on supplemental wages up to $1 million per calendar year. Amounts exceeding $1 million trigger the 37% rate. Alternatively, the aggregate method combines supplemental and regular wages to calculate withholding using standard tax tables. State supplemental wage rates vary widely, from 0% in states with no income tax to over 13% in California.
This Supplemental Wage Tax Calculator covers all types of supplemental pay. Enter the payment amount, select the pay type for reference, and specify your state rate to see the complete tax breakdown including federal withholding, state tax, Social Security, and Medicare. Payroll professionals can use this to verify withholding on any supplemental payment type.
Different types of supplemental pay can trip up even experienced payroll professionals. This calculator applies the correct federal flat rate Having a precise figure at your fingertips empowers better planning and more confident decisions. Manual calculations are error-prone and time-consuming; this tool delivers verified results in seconds so you can focus on strategy., accounts for the $1M threshold, adds state supplemental rates, and computes FICA—providing a single tool for all supplemental wage withholding calculations regardless of pay type.
Federal Tax = Amount × 22% (flat) or 37% (above $1M YTD supplemental) State Tax = Amount × State Supplemental Rate Social Security = Amount × 6.2% (up to wage base) Medicare = Amount × 1.45% (+ 0.9% above $200K) Net Payment = Amount − Federal − State − SS − Medicare
Result: $10,402.50 net payment
Federal: $15,000 × 22% = $3,300. State: $15,000 × 6.6% = $990. SS: $15,000 × 6.2% = $930. Medicare: $15,000 × 1.45% = $217.50. Total tax: $5,437.50. Net: $15,000 − $5,437.50 = $9,562.50.
The IRS provides two approaches for withholding on supplemental wages. The percentage method withholds a flat 22% on amounts up to $1 million and 37% on the excess. This is simple and predictable. The aggregate method treats the supplemental payment as if it were paid with regular wages in a single pay period, potentially resulting in higher withholding for employees with high regular pay.
State supplemental wage rates vary significantly. California withholding on supplemental wages is 10.23% for amounts up to $1 million and 13.3% above that. New York uses 11.7%, while Illinois applies its flat rate of 4.95%. Understanding your state's specific rules is essential for accurate payroll processing.
Maintain a reference table of current federal and state supplemental wage rates. When processing multiple types of supplemental pay in a single pay period, track cumulative supplemental wages against the $1M threshold. Document the withholding method used for each payment type for audit purposes.
The IRS classifies the following as supplemental wages: bonuses, commissions, overtime pay, severance pay, back pay, retroactive pay increases, accumulated sick leave payouts, taxable fringe benefits, moving expense reimbursements, and non-deductible employee expense reimbursements. Keeping this factor in mind will improve the accuracy and usefulness of your overall calculations.
No. The 22% flat rate is a withholding rate, not the final tax rate. Your actual tax liability depends on your total annual income and tax bracket. The difference between withholding and actual liability is reconciled on your annual tax return via a refund or balance due.
The 37% mandatory withholding rate applies to supplemental wages exceeding $1 million in a calendar year from the same employer. All supplemental payments up to $1 million use the 22% flat rate (or aggregate method).
Employers generally apply the same withholding method consistently. However, the flat rate method can only be used when supplemental wages are paid separately from (or specifically identified within) regular wages. If they're not identified separately, the aggregate method must be used.
Yes. Social Security (6.2% up to the wage base) and Medicare (1.45% with no cap) apply to all supplemental wages. The additional 0.9% Medicare tax applies when combined wages exceed $200,000.
States with income tax either specify a flat supplemental rate, require the use of standard withholding tables, or follow the federal approach. Rates range from about 3% to over 13%. Nine states with no income tax (TX, FL, WA, NV, WY, SD, AK, TN, NH) impose no state supplemental withholding.
Yes, overtime pay (the premium portion and sometimes the total overtime amount) is classified as supplemental wages. Employers can use the flat 22% rate for the overtime premium or combine it with regular pay under the aggregate method.
The taxable amount from exercising stock options or RSU vesting is treated as supplemental wages. Federal withholding at 22% (or 37% above $1M) applies, plus applicable state and FICA taxes.