The bonus tax calculator calculates the take-home bonus pay after-tax deduction using flat percentage and aggregate method.
Welcome to the Bonus Tax Calculator, our free online tool that helps you to get an estimated bonus tax after the deduction of federal tax, state tax, social security tax, and Medicare tax. This tool only applies to employees working in the USA because all the federal, state, and FICA tax is imposed according to the laws and rules in the USA. So, if you are from outside the United States, this tool will not work as you desire. But, if you are working for employers in the USA and at the time you are outside the country, you can use our tool for calculation.
If you receive a bonus two more times in a single year, in that condition, you need to sum up the bonuses and then use that total bonus amount in our tool for calculation, don't use it separately for each bonus amount for a single year.
How does the bonus tax calculator work?
The bonus tax calculator uses mathematical formulas and calculates using step-by-step calculations. We use the federal tax bracket and state tax bracket CSV file for the calculation of federal tax and state tax for single and married employees. We use the IRS and similar websites for tax-related data, including the social security and Medicare taxes. We set up the algorithm and flow of calculation to provide as correct output as possible. We have mentioned below how the steps and method work.
The flat percentage and aggregate methods are used for the federal tax deduction in the federal tax calculation. In the percentage method, 22% is deducted from your gross bonus as federal tax if the bonus amount is 1 million or less. And in the case of a bonus amount of more than 1 million, 37% is deducted from the remaining amount. For example, if you receive a 2 million bonus, then 22% is taxed on the first million, which is 1000000 * 0.22 = 220000, and 37% is taxed on the rest of the bonus amount, which is (2000000 - 1000000) * 0.37 = 370000. You have to deduct 220000+370000 = 590000 amount for the federal tax. Let's have another example for a lesser amount than 1 million. Suppose the bonus amount is only 50000; then only 22% is deducted for federal tax, which equals 11000.
And in the aggregate method, you are taxed based on your regular income and bonus amount, which is called the aggregate method. In this method, your bonus amount and regular pay are aggregated and then taxed. After that, our tool separates the tax for the bonus amount and displays it to you.
For the state tax calculation, you are taxed on the bonus amount according to the tax rate imposed by the particular state of the USA. Tax rates are different for different states. Some states have zero tax, some have flat tax rates, and many have a tax bracket system according to income. The states that do not take any taxes are Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, and Wyoming. These states have flat fixed tax rates, and states are Arizona, Colorado, Idaho, Illinois, Indiana, Kentucky, Michigan, Mississippi, New Hampshire, North Carolina, Pennsylvania, Utah, and Washington. The states such as Alabama, Arkansas, California, Connecticut, Delaware, Georgia, Hawaii, Iowa, Kansas, Louisiana, Maine, Maryland, Massachusetts, Minnesota, Missouri, Montana, Nebraska, New Jersey, New Mexico, New York, North Dakota, Ohio, Oklahoma, Oregon, Rhode Island, South Carolina, Vermont, Virginia, West Virginia, and Wisconsin have different tax bracket for the income and marital status.
Marital status should be selected according to your filing status while calculating because it affects the federal, state, and Medicare tax and standard deduction value. In our tool, we have allowed two options, single filers, and married filing jointly. You should select only one option among two options. Initially, a "single" option is selected as default. Later you can change it to a married option if you are filing jointly.
The wages pay method has a salary basis and an hourly basis. From these two methods, you have to choose one which fits you. The salary method is applicable to those who earn a yearly package salary basis. You only have to enter the yearly gross salary package you contract with your employer. Then, this tool does the rest of the calculation according to the input information. But in the hourly basis method, it is different from the salary basis. In the hourly basis method, you must enter your working hours and the hourly pay rate. Also, you have to choose the pay frequency, and how frequently you get payment from your employer. It is important to know that the working hours you enter should be according to the pay frequency. It means you must only enter a number of hours for that select pay frequency.
On top of that, you can add overtime hours and rates if applicable. Overtime addition can be included in both salary basis and hourly basis methods. You can add overtime information by clicking the "Add overtime" button.
The standard deduction is another part of the input section that includes standard deduction if the radio button is selected as "Yes". Otherwise, it remains "No" as default, which does not apply any standard deduction.
Before calculating, you must enter all the inputs and select the option carefully and correctly. Otherwise, outputs may disappoint you. We have formatted the input form as accordingly as possible for the user's easiness.
After the user clicks the "Calculate" button, all outputs will display, including the total take-home bonus after the deduction of federal, state, social security, and Medicare taxes. It also shows the individual tax deduction for federal, state, social security, and Medicare in the table. The result displayed as the take-home bonus is the remaining bonus amount after deducting all applicable taxes.
I work on an hourly basis, and I receive a bonus. Can I use this tool?
This tool can calculate the taxes for both the hourly basis employee and the salary-based employee. The hourly-based employee must enter working hours, pay rate per hour, and bonus amount received for the calculation. And working hours must be equal to the pay frequency you choose.
Which is the better option, the percentage or aggregate method for lesser federal tax?
Different users have different conditions and information, so you can enter information according to you and then compare which is better for you.
Is this website used to calculate the taxes for the gross income?
This free online tool is only useful for the employee who receives the bonuses, and this tool doesn't work for the calculation of the paycheck tax; this is only for bonus tax calculation. If you want to calculate how much you are taxed on your gross earning, then you can use the paycheck tax calculator.
We do not charge any fee. It is free to use
This online tool does not charge any cost for the use of it. It is totally free for all and will be free forever. We may use advertisements and affiliates in the near future to support our team and maintain the website for free.