What Is the Tax on a Bonus in Texas?
Your Texas bonus is taxed differently than regular pay. Learn how federal rules for supplemental income affect your net pay and your annual tax return.
The take-home pay from a bonus often differs from a regular paycheck because of specific federal tax rules. Federal regulations treat bonuses as supplemental income, which means the amount withheld for taxes is calculated differently than for your standard salary. For individuals residing in Texas, understanding how these payments are taxed is simplified by the state’s lack of an income tax.
The Texas Advantage No State Income Tax
A primary financial benefit for residents of Texas is the absence of a state-level income tax. This rule applies to all forms of earned income, including salaries, wages, and bonus payments. Consequently, when you receive a bonus, you will not see any deductions for Texas state income tax, which simplifies the tax situation.
Your entire focus regarding the taxation of your bonus will be on federal requirements. The lack of state income tax means a larger portion of your bonus is yours to keep compared to residents of states that do impose an income tax.
Federal Tax Withholding on Bonuses
The Internal Revenue Service (IRS) classifies bonuses as “supplemental wages,” which means they are subject to different withholding rules than your regular pay. Employers use one of two methods to calculate the federal income tax withholding on these payments, which can affect the initial amount withheld.
One approach is the percentage method. If you receive your bonus as a separate payment from your salary, your employer can withhold a flat 22% for federal income tax. This rate applies to supplemental income up to $1 million in a calendar year. For example, on a $5,000 bonus, your employer would withhold $1,100 for federal income tax.
The other option is the aggregate method. With this approach, your employer combines your bonus with your regular wages in a single paycheck and taxes the total amount based on your Form W-4 information. Adding a bonus to a regular paycheck can push that single payment into a higher withholding bracket, resulting in a larger tax deduction for that pay period.
Understanding FICA Taxes
Beyond federal income tax, your bonus is also subject to Federal Insurance Contributions Act (FICA) taxes. These taxes fund the Social Security and Medicare programs and are a standard component of payroll deductions. FICA taxes are withheld regardless of whether your employer uses the percentage or aggregate method for income tax.
FICA consists of two separate taxes. The first is Social Security tax, levied at 6.2% on earnings up to an annual wage base limit. For 2025, this limit is $176,100, meaning you stop paying Social Security tax once your total annual earnings exceed this amount.
The second component is Medicare tax, which has a rate of 1.45% and no annual income limit. An Additional Medicare Tax of 0.9% also applies to earnings over certain thresholds, such as $200,000 for single individuals. This means a minimum of 7.65% will be withheld from your bonus for FICA taxes.
Year-End Tax Filing and Reconciliation
The amount of tax withheld from your bonus is an estimate of your total tax obligation. The withholding process is a prepayment system, and the final calculation occurs when you file your annual income tax return with the IRS using Form 1040.
When you prepare your tax return, your bonus income is added to all other income sources for the year. Your total tax is then calculated based on your overall adjusted gross income and the applicable marginal tax brackets for your filing status. The U.S. tax system is progressive, meaning different portions of your income are taxed at different rates.
The total amount of tax withheld from your paychecks and bonus is credited against your calculated tax liability. If the amount withheld exceeds what you actually owe, you will receive a tax refund. If the withholding was insufficient to cover your total tax bill, you will owe an additional payment to the IRS.