What Is the Bonus Tax Rate in Massachusetts?
A Massachusetts bonus isn't taxed at a special rate. Learn the key difference between upfront withholding and the actual tax you'll owe on your annual return.
Receiving a bonus is a positive event, but the amount on the check can be surprising after taxes. The Internal Revenue Service (IRS) and state tax authorities classify bonuses as “supplemental wages,” a category including other payments like commissions, overtime, and severance pay. In Massachusetts, a bonus is subject to federal and state income taxes and other payroll deductions. While there is no special “bonus tax rate,” specific withholding methods are used that can make it seem like a different rate is applied, but the final tax is based on your total annual income.
Federal Tax Withholding on Bonuses
The IRS provides employers with two methods for withholding federal income tax on supplemental wages like bonuses. The choice of method is up to the employer and often depends on how the bonus is paid, which explains why the amount withheld can differ from regular paycheck withholding.
The first option is the Percentage Method, where the employer withholds a flat 22% from the bonus for federal income tax. This rate applies to total supplemental wages up to $1 million in a calendar year; any amount exceeding $1 million is withheld at 37%. For example, on a $5,000 bonus, the employer would withhold $1,100. This method is often used when the bonus is paid as a separate check.
The second option is the Aggregate Method. The employer combines the bonus with the employee’s regular wages for the current payroll period and treats the total as a single payment. Federal income tax withholding is then calculated based on the employee’s Form W-4 information. For instance, if an employee with $2,000 in regular wages receives a $5,000 bonus, the employer calculates withholding on a total income of $7,000, which can temporarily push the employee into a higher withholding bracket.
Massachusetts State Tax Withholding on Bonuses
Bonuses are also subject to state income tax withholding in Massachusetts. The Massachusetts Department of Revenue treats bonuses as supplemental wages, and this amount is deducted before you receive payment.
Massachusetts has a personal income tax rate of 5%, which is the rate used for withholding on supplemental payments. An additional 4% surtax applies to annual income that exceeds $1 million, meaning the final state tax rate can be 9% for top earners. On a $5,000 bonus, an employer would withhold $250 for the state. The ultimate tax liability, including any surtax, is reconciled when you file your annual tax return.
Other Required Payroll Deductions
Other mandatory payroll deductions also reduce the take-home amount of a bonus. These deductions are for the Federal Insurance Contributions Act (FICA), which funds Social Security and Medicare and applies to supplemental wages just as it does to regular pay.
The Social Security tax is 6.2% on all wages, including bonuses. This tax only applies up to an annual wage base limit, which for 2025 is $176,100. Once an employee’s total year-to-date earnings exceed this threshold, Social Security tax is no longer withheld.
The Medicare tax is 1.45% on all wages. Unlike Social Security, there is no wage base limit for Medicare. An Additional Medicare Tax of 0.9% is applied to employee wages exceeding $200,000 for single filers ($250,000 for married filing jointly), bringing the total Medicare rate on those higher earnings to 2.35%.
Final Tax Liability vs. Withholding
It is important to distinguish between the amount of tax withheld from a bonus and the final tax you actually owe. Withholding is a prepayment of your estimated annual tax bill, and the methods used for bonuses are designed to approximate this liability but are not the final calculation.
When you file your return, your bonus is added to your other earnings to arrive at your total gross income. This total income is then used to calculate your tax liability based on your filing status and the applicable marginal tax brackets. If the total amount withheld from all paychecks is greater than your final tax liability, you will receive a refund. If the amount withheld was less, you will owe an additional amount.