Payroll Gross-Up Calculator
A payroll gross-up allows an employer to give an employee a specific after-tax net amount by grossing up the payment to cover the associated tax withholding. For example, to deliver a $5,000 net relocation bonus to an employee in a 30% combined tax bracket, the employer must pay a gross amount of approximately $7,143, with the difference going to taxes. This calculator solves for the required gross using the formula: gross = net / (1 - combined tax rate), and shows the total tax cost to achieve the desired net payment.
Gross-up formula
Combined rate = federal rate + state rate + (FICA rate if applicable)
Gross = net / (1 - combined rate)
Total taxes = gross - net
Employer cost = gross (the amount the employer must pay)
The FICA rate included in gross-ups is 7.65% (6.2% SS + 1.45% Medicare) when the employee has not yet hit the SS wage base. The formula gives the single-iteration gross-up, which may slightly under-cover due to the tax-on-tax effect of the additional gross amount itself.
When gross-ups are used
- Relocation reimbursements: since TCJA 2017, moving expense reimbursements are taxable income; employers often gross up to preserve the employee's net benefit.
- Signing bonuses and retention bonuses where the employer promises a specific net amount.
- Equity award true-up payments where the employer covers the withholding on vested RSUs or stock options.
- Employer-paid executive perquisites such as company car personal use, club memberships, and life insurance premiums above $50,000.
- Tax assistance programs (TAX GROSS) for international assignments where the employer aims to keep the employee tax-neutral.
Payroll gross-up: frequently asked questions
What is a payroll gross-up?
A payroll gross-up is used when an employer wants to give an employee a specific net (take-home) amount, such as a bonus or relocation payment, and agrees to cover the taxes. The gross-up formula increases the gross payment so that after taxes, the employee receives the desired net amount.
How is the gross-up amount calculated?
The gross-up formula is: gross = net / (1 - combined tax rate). For example, if you want to net $5,000 and the combined tax rate is 30%, the gross amount is $5,000 / (1 - 0.30) = $7,142.86. The employer pays additional taxes on the extra amount.
What tax rates are included in a gross-up?
A payroll gross-up typically covers all taxes withheld from the payment: federal income tax (often the 22% flat supplemental rate), Social Security (6.2%), Medicare (1.45%), and state income tax. The employer determines which taxes to gross up; sometimes only federal income tax is grossed up.
When is a gross-up commonly used?
Gross-ups are common for relocation reimbursements, signing bonuses, and other one-time payments where the employer wants the employee to receive a specific after-tax amount. Moving expense reimbursements became taxable income after the 2017 Tax Cuts and Jobs Act, making gross-ups more common.
Does the grossed-up amount itself create more taxes?
Yes. This is a known complexity. The extra gross amount paid to cover taxes itself becomes income, which could trigger further tax. For simplicity, most employers use one iteration of the gross-up formula with the flat supplemental rate, acknowledging a small residual under-coverage.
Official sources
- IRS: Publication 15 (Employer's Tax Guide), Supplemental Wages.
- IRS: Topic 751 - Social Security and Medicare Withholding Rates.
Reviewed by the CalculatorHub team, edited by James Graham, 15 June 2026. See our methodology.