Supplemental wages are any pay you receive on top of your regular salary or hourly wage, such as bonuses, commissions, severance and back pay. The IRS lets employers withhold federal income tax on these payments differently from your regular paycheck, most often at a flat 22%.
That different treatment is why a bonus check can look heavily taxed, or lightly taxed, compared with your normal pay. This guide explains what counts as supplemental pay, the two withholding methods employers use, and how it all settles when you file your return.
What counts as supplemental wages
IRS Publication 15 defines regular wages as the amount you are paid at a set rate for each pay period: your salary, or your hourly rate times your hours. Supplemental wages are payments outside that regular schedule. Common examples include:
- Bonuses, including signing, retention, holiday and performance bonuses
- Commissions
- Overtime pay, when an employer chooses to treat it separately
- Severance pay
- Back pay and retroactive pay increases
- Payouts for unused sick leave
- Awards and prizes paid to employees
Many employers simply run overtime through the regular payroll and tax it with your normal wages. Bonuses and commissions are the payments most likely to show up as a separate supplemental line on your pay stub.
How supplemental wages are withheld: two methods
Federal income tax withholding on supplemental wages follows one of two methods. Your employer picks the method, not you.
The percentage (flat rate) method
If the supplemental payment is paid separately from your regular wages, or is listed separately on the same check, the employer can withhold a flat 22% for federal income tax. For 2026, that rate applies to supplemental wages up to $1 million in the year. It ignores your filing status and the choices on your W-4.
The aggregate method
Under the aggregate method, the employer adds the supplemental payment to your regular pay for that period and withholds as if the whole amount were your normal paycheck. Because the payroll formula annualizes each paycheck, a big one-time amount looks like a much higher salary, so withholding on that check can run well above 22%.
The mandatory 37% rate
Once an employee's supplemental wages pass $1 million in a calendar year, the employer must withhold 37% on the excess, regardless of the W-4. Below that line, the 22% flat rate is the common choice.
Worked example: a $6,000 bonus in North Carolina
Take a single filer earning $72,000 a year in North Carolina, paid biweekly (26 paychecks). According to the PaycheckHubs paycheck calculator, a regular paycheck is about $2,769 gross, with roughly $270 withheld for federal income tax. Now add a $6,000 bonus.
| Item | Flat 22% method | Aggregate method |
|---|---|---|
| Bonus amount | $6,000 | $6,000 |
| Federal income tax withheld on the bonus | $1,320 | About $1,433 |
| Social Security (6.2%) | $372 | $372 |
| Medicare (1.45%) | $87 | $87 |
| Bonus left before state tax | $4,221 | About $4,108 |
The aggregate figure comes from running the combined check ($8,769) through the calculator: federal withholding on that check is about $1,702, compared with $270 on a normal check, so about $1,433 of it is tied to the bonus. These are estimates; your employer's payroll system may round differently.
Here is the useful part. Running the calculator for $72,000 and then for $78,000 shows annual federal withholding rising from about $7,010 to about $8,330, a difference of roughly $1,320. For this worker, the flat 22% rate lines up almost exactly with the extra tax the bonus adds for the year, because their income sits in the 22% bracket. The aggregate method simply withholds more up front, and the extra comes back at tax time.
North Carolina has its own rules for withholding state tax on bonuses. Check the North Carolina Department of Revenue, or try the North Carolina paycheck calculator for regular pay estimates.
Supplemental wages and your actual tax bill
Withholding is a prepayment, not the final tax. When you file, all of your wages, regular and supplemental, are added together and taxed using the normal 2026 brackets. There is no separate "bonus tax rate" on your return.
That means the 22% flat rate can be too much or too little depending on your bracket:
- If your income stays in the 10% or 12% bracket, 22% is more than the bonus will actually cost you in federal income tax, and you will likely get some back as a refund.
- If you are in the 22% bracket, flat withholding is usually close to right.
- If you are in the 24% bracket or higher, 22% falls short. For example, a single filer with taxable income over $105,700 pays 24% on the next dollars earned, so a large bonus withheld at 22% can leave a balance due.
Our guide to how bonuses are taxed walks through more bonus scenarios, and marginal vs effective tax rate explains why the bracket your last dollars fall into matters here.
Social Security, Medicare and state tax on supplemental pay
Supplemental wages are still wages, so FICA taxes apply the same way they do to your salary: 6.2% for Social Security on wages up to $184,500 for 2026, and 1.45% for Medicare with no cap. If a bonus pushes your year-to-date wages past $200,000, your employer also starts withholding the 0.9% Additional Medicare Tax on the amount over that line.
If your wages pass the $184,500 Social Security wage base, Social Security withholding stops for the rest of the year, which is why a December bonus can be larger than one paid in March for a high earner. See our explainer on the Social Security wage base for details.
State treatment varies. Some states use a flat supplemental withholding rate, others use the aggregate approach, and the nine states with no wage tax, including Texas and Florida, withhold no state income tax at all. Check your state tax agency for its rule.
What you can do if bonus withholding is off
You can't tell your employer which supplemental method to use, but you can adjust your regular withholding. If you expect a large bonus and you are in the 24% bracket or higher, you could add extra withholding in Step 4(c) of your W-4 for the rest of the year. If 22% is clearly too much for your bracket, the difference comes back when you file.
The IRS Tax Withholding Estimator lets you enter bonus and commission income to see whether your total withholding is on track. For a personal situation with several moving parts, a tax professional can help.
Frequently Asked Questions
Are supplemental wages taxed at a higher rate?
No. Supplemental wages are taxed at the same rates as the rest of your income when you file. Only the withholding method differs, which can make the paycheck look more or less taxed.
Is overtime pay a supplemental wage?
The IRS lists overtime as a type of supplemental wage, but many employers include it in regular payroll and withhold on it normally. Either way, it is fully subject to Social Security and Medicare.
Can I ask my employer to withhold more from my bonus?
Your employer's payroll policy decides the method. You can raise withholding on your regular paychecks with a new W-4, which has the same overall effect for the year.
Does the 22% rate apply to commissions?
Yes, if the employer pays commissions separately or identifies them separately, it can use the 22% flat rate. Some employers pay commissions through regular payroll instead.
Sources
- IRS Publication 15, Employer's Tax Guide
- IRS Publication 15-T, Federal Income Tax Withholding Methods
- IRS Revenue Procedure 2025-32
- SSA: Contribution and Benefit Base
Run the numbers for your state
Written and checked against IRS, Social Security Administration and state tax agency publications for the 2026 tax year. General information, not tax, legal or financial advice. Read our editorial policy, calculation methodology and sources.