What is the federal income tax rate for supplemental withholding on bonuses and commissions?

The federal income tax rate for supplemental withholding on bonuses and commissions is generally set at 22%. This fixed percentage is applicable when using the percentage method for withholding on supplemental wages. Additionally, if a bonus or commission exceeds $1 million, the portion above that threshold is subject to a higher tax rate of 37%. This tiered approach is designed to align tax withholding with the progressive nature of the federal income tax system, ensuring that higher earnings are taxed at higher rates.

While the other percentages presented may relate to specific situations or different categories of income, they do not apply to the standard federal supplemental withholding rate for bonuses and commissions. The 22% rate provides a straightforward guideline for employers to apply when calculating the tax withholding on these types of payments, making it a critical point for payroll professionals to understand.