What is the supplemental income tax rate?

The federal supplemental income tax withholding rate is 22% on the first $1 million of supplemental wages in a calendar year, and 37% on amounts above $1 million. Supplemental wages include bonuses, commissions, overtime pay, severance, back pay, and taxable fringe benefits. This is a withholding rate used by employers — your actual tax owed depends on your full-year income and marginal bracket.

Is supplemental income taxed at a higher rate than regular income?

No. Supplemental income is subject to the same federal income tax brackets as all other income. The supplemental rate (22%) is a withholding convention — it's how employers prepay your taxes on non-salary income. At tax filing, everything is combined and taxed in the normal progressive system. If more was withheld than owed, you get a refund.

Do commissions have the same tax rate as bonuses?

Yes — commissions are supplemental wages and subject to the same 22% flat withholding rate (when paid separately from regular wages) plus FICA. Some employers pay commissions combined with salary in one paycheck, in which case the aggregate withholding method applies and results can vary.

Supplemental Income Tax Rate: Bonuses, Commissions, and More

Q: What counts as supplemental income?

Supplemental wages include: bonuses (year-end, signing, performance), commissions, overtime pay, accumulated sick pay paid out, severance, taxable awards and prizes, back pay, taxable fringe benefits, payments for non-deductible moving expenses, and tips reported to employer. Regular salary and hourly wages are not supplemental; they use standard withholding methods.

What Counts as Supplemental Income?

The IRS defines supplemental wages as compensation paid in addition to regular wages. The key distinction: supplemental wages are typically irregular, variable, or one-time payments rather than your base salary or regular hourly pay.

Supplemental wages include:

Income Type	Supplemental?
Year-end / performance bonus	✅ Yes
Signing bonus	✅ Yes
Commission payments	✅ Yes
Overtime pay	✅ Yes
Severance pay	✅ Yes
Accumulated vacation payout	✅ Yes
Back pay awards	✅ Yes
Taxable prizes and awards	✅ Yes
Taxable fringe benefits	✅ Yes
Non-deductible moving expense reimbursements	✅ Yes
Regular salary	❌ No
Regular hourly wages	❌ No
Regular overtime (if always part of pay)	Depends

Federal Supplemental Withholding Rates (2026)

Supplemental Wages	Withholding Rate
Up to $1,000,000 in a calendar year	22%
Amount above $1,000,000	37%

The $1 million threshold is cumulative across the year. If you’ve already received $800,000 in supplemental wages (commissions, bonuses) and then receive a $300,000 year-end bonus:

First $200,000 of bonus: withheld at 22%
Remaining $100,000: withheld at 37%

State Supplemental Income Tax Rates (2026)

States have their own withholding rules for supplemental income. Some mirror the federal approach with a flat rate; others require the aggregate method.

State	Supplemental Rate
California	10.23%
New York	11.7% (NYC adds 3.876% city tax)
New Jersey	22% (flat on all wages)
Oregon	8%
Minnesota	6.25%
Wisconsin	7.65%
Georgia	5.75%
North Carolina	4.75%
Colorado	4.4%
Utah	4.85%
Texas	0%
Florida	0%
Washington	0% (state income tax)
Nevada	0%

California + federal combined: On a $10,000 bonus in California, federal withholding is $2,200 + California $1,023 + FICA $765 = $3,988 withheld (~40% apparent rate).

Two Withholding Methods Explained

Flat Rate Method (22%)

The employer withholds exactly 22% federal on the supplemental payment, regardless of when it’s paid or how it relates to regular wages.

Best for predictability. You know exactly what federal withholding will be before receiving the check.

Aggregate Method

The employer combines the supplemental payment with the most recent regular paycheck for that pay period, recalculates withholding on the combined amount using IRS wage bracket tables, and subtracts the withholding already applied to the regular paycheck.

This method can result in higher withholding than the flat 22% method when:

The combined paycheck is large relative to the employee’s normal pay (e.g., a $50,000 bonus paid with a $5,000 salary check)
The employee is in a high bracket

Effect: At lower income levels, aggregate and flat methods produce similar results. At moderate-high income levels, aggregate often withholds more.

Supplemental Rate vs. Actual Tax Rate

The supplemental withholding rate is not your tax rate. Your actual rate depends on:

Total annual income from all sources
Filing status (single, married, head of household)
Deductions (standard or itemized)
Credits (child tax credit, education credits, etc.)

Example comparison:

Taxpayer	Salary	Bonus	Total Income	Marginal Rate	Supplemental Withheld	Over/Under
Single, $45k salary	$45,000	$5,000	$50,000	12% effective	$1,100 at 22%	Over-withheld by ~$500
Single, $90k salary	$90,000	$10,000	$100,000	22% marginal	$2,200 at 22%	Accurate
Single, $200k salary	$200,000	$20,000	$220,000	32% marginal	$4,400 at 22%	Under-withheld by ~$2,000

High earners may actually owe more tax than was withheld, since the 22% supplemental rate is below their 32-37% marginal bracket.

Supplemental Income and the Additional Medicare Tax

For high earners, supplemental wages can also trigger the Additional Medicare Tax of 0.9%, which applies to wages above:

$200,000 (single)
$250,000 (married filing jointly)
$125,000 (married filing separately)

This tax is reported on your tax return; employers are only required to withhold it when your wages from that employer exceed $200,000 in the year. If you have multiple employers or self-employment income pushing you above the threshold, you may owe it at filing even if nothing was withheld.

What to Do If Too Much Was Withheld

If the 22% supplemental withholding results in over-paymennent (e.g., you’re in the 12% bracket), you’ll receive the excess as a tax refund after filing. You don’t need to do anything special — the math corrects itself at filing.

To avoid the wait: increase your W-4 allowances or reduce withholding amount on your regular paychecks for the remainder of the year to approximate the refund in advance.