These bonuses, although supplemental to a person’s regular income, are taxed like regular income.
For people in higher tax brackets, this can mean that as much as 40 percent of a person’s bonus will be withheld from the bonus check before it is issued.
How are bonuses taxed in California 2018?
Supplemental wages were taxed at a flat 25% tax rate in 2017 and will be taxed at a flat rate of 22% in 2018, provided the bonus is under $1 million. If your bonus is simply added to your standard wages in one big paycheck, your employer will use standard withholding tables to calculate tax withdrawals.
Are bonuses taxed differently in California?
And because of the way bonuses are initially taxed, you might see a higher-than-normal withholding when you receive that extra pay. The other method would withhold taxes at whatever rate your regular income is taxed. (Bonuses above $1 million are taxed differently.)
How are bonuses taxed?
The Percentage Method: The IRS specifies a flat “supplemental rate” of 25%, meaning that any supplemental wages (including bonuses) should be taxed in that amount. If you receive a $5,000 bonus, under this rule, $1,250 (25% of $5,000) goes straight to the IRS.
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