Supplemental Wage Tax Calculator
Supplemental wages such as bonuses, commissions, and severance pay can be withheld using two different IRS-approved methods. The flat-rate method uses a 22% rate (37% above $1 million), while the aggregate method annualizes your regular plus supplemental wages and applies the standard payroll tax tables. This calculator computes federal income tax withholding under both methods so you can see the difference and understand which method your employer is required or permitted to use.
Supplemental withholding formula
Flat-rate: tax = min(supp, $1,000,000 - prior) * 0.22 + max(0, supp + prior - $1,000,000) * 0.37
Aggregate: annualize (regular + supp), apply bracket table, subtract regular withholding
The aggregate method uses the 2025 single-filer payroll withholding tables. The flat method is simpler and produces predictable results. Neither method changes your actual annual tax liability.
Choosing between withholding methods
- The flat 22% rate is simple and predictable. It may over-withhold if your actual marginal rate is below 22%, or under-withhold if above 22%.
- The aggregate method is more accurate for people in lower brackets (below 22%) but can cause surprisingly high withholding for higher-income earners.
- Employers who combine regular and supplemental pay in one payment must use the aggregate method.
- Employees who expect under-withholding can request additional withholding on Form W-4 or make additional estimated tax payments.
- If you receive supplemental wages above $1 million in a year, the excess is subject to mandatory 37% withholding regardless of method chosen for the sub-$1M portion.
Supplemental wage withholding: frequently asked questions
What are supplemental wages?
Supplemental wages are compensation paid in addition to regular wages, including bonuses, commissions, overtime, severance pay, back pay, and expense reimbursements that exceed the IRS allowable amount. They are subject to special withholding rules described in IRS Publication 15.
What is the flat-rate withholding method?
Under the flat-rate method, the employer withholds a flat 22% federal income tax on supplemental wages up to $1 million, and 37% on amounts above $1 million in the calendar year. This method may be used only when the supplemental payment is identified separately from regular wages.
What is the aggregate withholding method?
Under the aggregate method, the employer adds the supplemental wage to the most recent regular-period wage, computes withholding on the total using the payroll tables, and then subtracts any tax already withheld on the regular wage. This can result in higher or lower withholding than the flat-rate method, depending on annualized income.
When must the aggregate method be used?
Employers must use the aggregate method when supplemental wages are not separately identified from regular wages (they appear as one combined payment). The flat-rate method is optional and only available when the supplemental amount is identified separately.
Does the withholding method affect my actual tax owed?
No. The withholding method only determines how much is withheld from the payment; it does not change your actual tax liability. Any difference between withholding and actual tax is reconciled when you file your annual Form 1040.
Official sources
- IRS: Publication 15 (Employer's Tax Guide), Section 7 - Supplemental Wages.
- IRS: Publication 15-T (Federal Income Tax Withholding Methods).
Reviewed by the CalculatorHub team, edited by James Graham, 15 June 2026. See our methodology.