How Bonus Pay Appears on a Paystub

Bonus pay appears on a paystub as its own earnings line, labeled Bonus or BON, either beside regular pay or on a separate bonus-only stub. Federal income tax on it is usually withheld one of two ways under IRS Publication 15: a flat 22% for 2026, or the aggregate method that combines the bonus with regular wages.

That withholding choice is why a holiday bonus check often looks smaller than people expect. Social Security and Medicare come out at their normal rates, state withholding follows state rules, and a 401(k) percentage may or may not apply. The sections below show both federal methods with the same $1,500 December bonus and explain what else to check on the stub. For the layout of a stub as a whole, see the guide to reading a pay stub.

Where the bonus line sits on the stub

Employers pay bonuses in one of two ways, and each leaves a different trail.

• On a regular paycheck. The bonus becomes an extra row in the earnings section, usually with the hours and rate columns blank. Gross pay for that period includes it, so every percentage-based deduction on that stub is larger than usual.
• On a separate check. The bonus gets its own stub with its own pay date. The earnings section may show nothing but the bonus, while the YTD column still carries all the regular pay received so far that year.

Labels vary more than people expect: Bonus, BON, Holiday bonus, Spot award, Incentive, Retention, Sign-on and Referral are all common. Some employers use different codes for bonuses they decide on freely and bonuses promised by a formula, and that distinction matters for overtime, as a later section explains.

Two ways employers withhold federal income tax on a bonus

IRS Publication 15 (Circular E) for 2026 treats bonuses as supplemental wages, in the same group as commissions, overtime pay, back pay and reimbursements under a nonaccountable plan. It gives employers a choice of method, within limits.

The percentage method: a flat 22% for 2026

The employer withholds a flat 22% of the bonus as federal income tax. Publication 15 allows this only when two conditions hold: the bonus is identified separately from regular wages, either as its own payment or its own line, and income tax was withheld from the employee's regular wages in the current or the preceding calendar year.

The aggregate method

The employer adds the bonus to the regular wages for the current or most recent payroll period and figures withholding on the total as if it were a single payment. It then subtracts the tax already withheld from the regular wages, and the remainder is withheld from the bonus. When no income tax was withheld from regular wages in the current or preceding year, the flat rate is not available and the aggregate method applies.

Bonuses above $1 million

Publication 15 makes 37% mandatory for 2026 on the part of an employee's supplemental wages that exceeds $1 million in the calendar year, whichever method the employer uses below that point.

A $1,500 holiday bonus on its own check

Illustrative example (made-up figures): an employee receives a $1,500.00 holiday bonus on a separate December check. The employer uses the percentage method. State income tax is assumed at 5% for this example only, because state rules differ.

The deductions total $330.00 + $93.00 + $21.75 + $75.00 = $519.75, leaving $980.25, or about 65% of the bonus. If the employee's 401(k) plan counts bonuses as eligible pay and they defer 5%, another $75.00 comes out first, federal taxable wages fall to $1,425.00, and the 22% withholding becomes $313.50.

The same bonus under the aggregate method

Illustrative example (made-up figures): the employee's regular biweekly wages are $2,500.00, and the employer pays the $1,500.00 bonus in the same period using the aggregate method. Assume the employer's withholding calculation gives $260.00 on the $2,500.00 of regular wages alone and $640.00 on the combined $4,000.00. Both withholding figures are assumptions for illustration, not IRS table results.

• Withholding on the combined $4,000.00: $640.00
• Less withholding on regular wages alone: $260.00
• Federal withholding attributed to the bonus: $640.00 − $260.00 = $380.00

In this example the aggregate method withholds about 25.3% of the bonus, because $380.00 ÷ $1,500.00 = 0.2533. The combined $4,000.00 is treated as if the employee earned that much every two weeks, which pushes part of it into higher withholding brackets. For an employee with lower regular wages, the same method can withhold less than 22%, so neither method is always the larger one.

Why a bonus check can look over-withheld

Withholding is a prepayment credited against the tax figured on the employee's annual return, not the final tax on the bonus. A bonus is simply added to the year's other income when the return is prepared. If total withholding for the year ends up higher than the tax owed, the difference comes back as a refund, and if it is lower, the balance is due with the return.

That is why two employees with identical bonuses can see different net amounts on their stubs and still end up in the same place for the year. The stub shows the employer's withholding method, not a tax bill.

Social Security, Medicare and the wage base

Bonuses are wages for Social Security and Medicare at the usual 6.2% and 1.45%. The difference shows up for higher earners near the 2026 Social Security wage base of $184,500. Suppose an employee has $178,000.00 of Social Security wages so far and receives a $12,000.00 year-end bonus. Only $6,500.00 of the bonus is under the base, so Social Security is $6,500.00 × 6.2% = $403.00, while Medicare still applies to the full $12,000.00 at $174.00. If total wages for the year pass $200,000, the 0.9% Additional Medicare Tax is added from that point.

When a bonus changes overtime pay

Department of Labor Fact Sheet #56C (revised December 2019) says nondiscretionary bonuses must be included in a non-exempt employee's regular rate when overtime is calculated. It lists bonuses based on a predetermined production formula, attendance, safety and quality or accuracy of work as nondiscretionary. A bonus is discretionary only when the employer keeps discretion over both whether to pay it and how much until at or near the end of the period, and has not promised it in advance.

On a stub, a nondiscretionary bonus can bring an extra line such as "OT adjustment". Consider an employee paid $16.00 an hour who works 44 hours in a week and earns an $88.00 attendance bonus for that week. Straight-time pay plus the bonus is $704.00 + $88.00 = $792.00, the regular rate becomes $792.00 ÷ 44 = $18.00, and the overtime premium for 4 hours is 4 × $9.00 = $36.00. Without the bonus, the premium would have been 4 × $8.00 = $32.00, so the adjustment line is $4.00.

State withholding on bonuses

States set their own rules for supplemental wages. Some publish a flat supplemental withholding rate, some require the bonus to be combined with regular wages, and states without a tax on wages withhold nothing at all. Local wage taxes may also apply to the bonus. The state revenue department's employer withholding guide describes the current method, and the employer's payroll provider applies it.

Checking a bonus stub

1. Confirm the gross bonus matches the bonus letter, award notice or commission plan.
2. Divide federal income tax by the bonus amount; exactly 22% points to the percentage method, and anything else suggests the aggregate method.
3. Check that Social Security is 6.2% and Medicare 1.45% of the bonus, unless the wage base or the $200,000 threshold applies.
4. See whether a 401(k) deduction was taken, and compare that with the plan's definition of eligible pay.
5. Confirm the bonus appears in YTD gross and in a YTD bonus line, if the stub has one.
6. Note the pay date, since wages count toward the year in which they are paid; the difference from the work period is covered in pay date vs period end date.

After the bonus, compare the next regular stub with the one before the bonus. Deductions should return to their usual levels, and if they do not, the reasons in why deductions change between pay periods are the place to start. The running totals that absorb the bonus are explained in what YTD means on a paystub.

Recording a bonus on a paystub-style record

On PayStubGo's paystub generator, the Bonus field adds the amount to gross pay for that stub. When the bonus was paid on its own check, create a separate stub with the bonus pay date rather than folding it into a regular period, and enter the withholding amounts the payroll source actually used. Net pay on that stub should then match the bonus deposit, and the relationship between the two figures follows the same logic as gross pay vs net pay.

The 22% rate and the aggregate method describe how employers withhold, not what a bonus finally costs in tax. For an individual tax picture, a tax professional is the right source, and PayStubGo formats the figures you enter without calculating authoritative withholding.

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