Do You Pay Social Security on Bonuses?
Understand how Social Security tax applies to your bonus. Your total annual earnings play a crucial role in determining the final amount you owe.
Yes, bonuses are subject to Social Security tax. The Internal Revenue Service (IRS) views bonuses as a form of employee compensation, and because they are considered income, these payments are taxable. When you receive a bonus, your employer is required to withhold taxes from it, just as they do from your standard paychecks. These withholdings cover several different types of taxes, including federal and state income tax, as well as federal payroll taxes that fund Social Security and Medicare.
Bonuses Classified as Supplemental Wages
The IRS categorizes bonuses as “supplemental wages,” which groups them with other types of pay that are not part of an employee’s regular salary. This classification provides clear rules for how they must be handled for tax purposes. Supplemental wages can include:
- Commissions
- Overtime pay
- Severance pay
- Awards
This classification ensures that all forms of cash compensation an employee receives are treated as part of their total earnings for the year. A dollar earned through a bonus is the same as a dollar earned from a salary. Therefore, these supplemental payments are subject to the same employment taxes that apply to your regular pay, including those under the Federal Insurance Contributions Act (FICA) for Social Security and Medicare.
The designation as supplemental wages has direct implications for how your employer manages your payroll. It means they cannot treat a bonus as a tax-free gift. Instead, they must follow specific withholding procedures outlined by the IRS for this type of income. This ensures that tax obligations are met as the income is earned, rather than leaving the employee with a large, unexpected tax bill at the end of the year.
How FICA Taxes Apply to Bonuses
FICA taxes are a combination of two federal taxes: Social Security and Medicare. For employees, the Social Security tax rate is 6.2% and the Medicare tax rate is 1.45%, for a combined rate of 7.65%. Your employer is responsible for withholding these amounts from your pay and also pays a matching share. When you receive a bonus, these same flat percentages are applied to the gross amount of the payment.
A detail in this process is the annual Social Security wage base limit. This is an income threshold set by the Social Security Administration each year, beyond which Social Security taxes are no longer deducted. For 2025, this limit is $176,100. This cap means that once your total year-to-date earnings have surpassed this amount, any subsequent income within that year is not subject to the 6.2% Social Security tax.
To illustrate, consider an employee who has already earned $170,000 during the year and then receives a $10,000 bonus. Only the first $6,100 of that bonus (the amount needed to reach the $176,100 limit) would be subject to the Social Security tax. The remaining $3,900 of the bonus would be exempt from the 6.2% withholding.
Unlike Social Security, the Medicare tax does not have a wage cap. The 1.45% tax applies to all of your earnings, including the full bonus amount. High earners are also subject to an Additional Medicare Tax. An extra 0.9% is withheld from earnings once they exceed $200,000 in a calendar year. This additional tax applies to the portion of your income over the threshold, and employers do not pay a matching share for it.
Understanding Bonus Withholding Methods
Many people notice that the tax withholding on a bonus check seems high compared to their regular paycheck. This is not because of FICA taxes, which are a consistent flat percentage, but due to the methods used for federal income tax withholding on supplemental wages. The IRS permits employers to use one of two primary methods for this: the Percentage Method or the Aggregate Method. Understanding these methods can clarify why your take-home bonus amount might be less than you anticipated.
The Percentage Method is a common approach, especially when a bonus is paid as a separate check. With this method, the employer withholds a flat 22% for federal income tax on supplemental wages up to $1 million. If a bonus exceeds $1 million, the amount over the threshold is subject to a 37% withholding rate. This flat rate is applied regardless of the employee’s regular income tax bracket or the allowances claimed on their Form W-4.
Alternatively, an employer might use the Aggregate Method, which is more common when a bonus is included with a regular paycheck. In this case, the employer combines the bonus with the employee’s regular wages for that pay period. They then calculate the total federal income tax withholding on this combined amount using the IRS tax tables and the employee’s Form W-4 information. This can temporarily push the employee into a higher tax bracket for that single pay period, resulting in a larger percentage of the total pay being withheld.