A bonus paid to a California employee gets hit from several directions at once. Federal income tax is withheld at a flat 22%, California withholds another 10.23%, and then Social Security, Medicare, and State Disability Insurance come out on top of that. On a typical bonus, expect roughly 41% or more to be withheld before the money reaches your account. That is how bonuses are taxed in California at the paycheck stage — but withholding is not the same as what you actually owe, and the two are reconciled when you file.
The Federal Flat Rate on Bonuses
The IRS classifies bonuses as “supplemental wages,” a category that also covers commissions, overtime, and severance. When a bonus is paid separately from your regular check, or identified separately on a combined check, your employer withholds federal income tax at a flat 22%.1Internal Revenue Service. Publication 15 (2026), (Circular E), Employer’s Tax Guide Your W-4 elections and your regular bracket do not change that number. The flat rate exists so payroll can process irregular payments without redoing a full tax calculation.
One boundary worth naming: if your supplemental wages from a single employer exceed $1 million in a calendar year, everything above $1 million is withheld at 37%.1Internal Revenue Service. Publication 15 (2026), (Circular E), Employer’s Tax Guide For nearly everyone else, 22% is the federal number.
California’s 10.23% Supplemental Rate
California requires employers to withhold state income tax on bonuses at a flat 10.23%.2Employment Development Department. California Employer’s Guide (DE 44) – How to Withhold PIT on Supplemental Wages The rate applies to bonuses and stock option income specifically. Other supplemental pay, such as separately paid commissions or overtime, may be withheld at 6.6% instead.
Because 10.23% is a fixed rate rather than your marginal rate, it will not line up perfectly with what you actually owe. California’s 2026 brackets run from 1% to 13.3%, so a top-bracket earner may be under-withheld on the bonus and a lower earner may be over-withheld. The difference gets sorted out on your California return.
Social Security and Medicare
Payroll taxes come out of the bonus too. Social Security is withheld at 6.2% and Medicare at 1.45%, for a combined 7.65%.3Internal Revenue Service. Topic No. 751, Social Security and Medicare Withholding Rates
Social Security has a ceiling. Once your total wages for the year reach $184,500 in 2026, the tax stops.4Social Security Administration. 2026 Cost-of-Living Adjustment (COLA) Fact Sheet If your salary has already crossed that threshold before the bonus arrives, no more Social Security tax comes out. Medicare has no cap.
Higher earners see an additional 0.9% Medicare surtax once wages cross a filing-status threshold: $200,000 for single filers, $250,000 for married filing jointly, and $125,000 for married filing separately.5Internal Revenue Service. Topic No. 560, Additional Medicare Tax Your employer starts withholding the extra 0.9% once your pay from that job passes $200,000, regardless of filing status. Any correction based on your actual filing status is handled on your return.
California SDI Now Applies to the Whole Bonus
California also withholds State Disability Insurance from your bonus. The 2026 rate is 1.3% of gross wages, funding both Disability Insurance and Paid Family Leave.6Employment Development Department. Contribution Rates, Withholding Schedules, and Meals and Lodging
This one changed recently. Senate Bill 951 eliminated the SDI taxable wage ceiling effective January 1, 2024.7Employment Development Department. Contribution Rates and Benefit Amounts Before that, SDI stopped once earnings passed a cap. Now every dollar is subject to the 1.3%, and there is no ceiling for large bonuses to sit above.
What a $10,000 Bonus Actually Looks Like
Put the rates together on a $10,000 bonus for a California employee who has not yet hit the Social Security wage base:
- Federal income tax at 22%: $2,200
- California income tax at 10.23%: $1,023
- Social Security at 6.2%: $620
- Medicare at 1.45%: $145
- California SDI at 1.3%: $130
Total withheld: about $4,118. Take-home: about $5,882. That is an effective withholding rate over 41%. Your actual stub may land a little differently depending on your employer’s payroll system and whether you have already crossed any wage base thresholds this year.
Why Your Employer’s Method Matters
Two calculation methods are common, and the one your payroll department picks changes what shows up on the check.
Percentage Method
The employer applies the flat rates directly to the bonus: 22% federal and 10.23% California.1Internal Revenue Service. Publication 15 (2026), (Circular E), Employer’s Tax Guide This is typical when the bonus is issued as its own check or clearly separated on a combined stub. The result is predictable and matches the numbers above.
Aggregate Method
The employer adds the bonus to your regular wages for the pay period and withholds as if the combined amount were your normal recurring pay.1Internal Revenue Service. Publication 15 (2026), (Circular E), Employer’s Tax Guide Withholding already assigned to the regular wages is subtracted, and the rest comes out of the bonus. Withholding often looks higher under this method because the inflated paycheck pushes the calculation into a higher bracket, as though you earn that amount every period.
California mirrors this. If the bonus is paid at the same time as regular wages, the state requires the employer to treat the combined amount as regular wages and use the standard withholding schedules rather than the flat 10.23%.2Employment Development Department. California Employer’s Guide (DE 44) – How to Withhold PIT on Supplemental Wages That can raise the state withholding too.
Ask HR or payroll which method they use if you want to know in advance. Any over-withholding gets corrected on your return; the method only affects your cash flow, not the year-end bill.
Withholding Is Not the Same as Tax Owed
The most common misconception is that the withholding rate is the tax rate. It is not. Withholding is an estimate sent to the IRS and the state on your behalf. Your real tax on the bonus depends on your total income for the year and the marginal bracket that income falls into.
Federally, if your overall income lands you in the 24% bracket or higher, the 22% withheld may leave you owing a bit more at filing. If you sit in the 12% bracket, 22% was too much and you get a refund on the difference.
California works the same way. The 10.23% flat rate sits in the middle of the state’s bracket structure, so a top-bracket earner facing 13.3% will likely come up short, while a lower earner will have been over-withheld. Overpayments come back as a refund; shortfalls show up as tax due.
How Bonuses Interact with Your 401(k)
Whether your 401(k) deferral applies to your bonus depends on how the plan defines “compensation.” IRS rules allow plans to include bonuses in the compensation used for elective deferrals and employer matching.8Internal Revenue Service. 401(k) Plan Fix-It Guide – You Didn’t Use the Plan Definition of Compensation Correctly for All Deferrals and Allocations Many plans do, meaning your usual deferral percentage automatically comes out of the bonus, and the employer match may too. Some plans exclude bonuses. Check the summary plan description or ask HR.
Watch the annual limit if your plan does include bonuses. For 2026, the 401(k) elective deferral cap is $24,500, plus an $8,000 catch-up if you are 50 or older.9Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026; IRA Limit Increases to $7,500 A large late-year bonus can push you past the cap if the plan does not stop deferrals automatically.
Reconciling at Tax Time
Federal income tax withheld from the bonus is included with the rest of your withholding in Box 2 of your W-2 and reported on Form 1040.10Internal Revenue Service. Instructions for Form 1040 and 1040-SR Any excess over your actual liability comes back as a refund; any shortfall is owed. California follows the same pattern on Form 540, with the Franchise Tax Board refunding overpayments or billing the difference. If the aggregate method inflated your withholding, expect a larger refund when you file.