How Bonuses Are Taxed in Texas: 22% Withholding and FICA

In Texas, bonuses are taxed only at the federal level: your employer typically withholds a flat 22% for federal income tax, plus 7.65% for Social Security and Medicare. Nothing comes out for state income tax, because Texas doesn’t have one. The 22% figure is a withholding rate, not your final tax rate — when you file your return, your bonus is added to the rest of your income and taxed at whatever bracket you land in.

No State Income Tax on a Texas Bonus

Texas is one of the few states that doesn’t tax personal income at all. In 2019, voters approved a constitutional amendment that flatly prohibits the legislature from imposing a tax on individual net income.¹

Because no state income tax exists, your employer has nothing to withhold for the state on a bonus. A $5,000 performance award has zero dollars deducted for state purposes. Everything you see coming out of the check is federal.

The Federal Flat 22% Withholding Rate

The IRS classifies bonuses as “supplemental wages,” a category that also includes commissions, overtime, severance, back pay, awards, prizes, and accumulated sick leave.² When a bonus is paid separately from your regular check and identified as supplemental pay, your employer can withhold at a flat rate rather than running it through the standard payroll tables.

That flat rate is 22% on supplemental wages up to $1 million in a calendar year. A $10,000 bonus produces $2,200 of federal income tax withholding. Once your total supplemental wages cross $1 million, every dollar above the threshold is withheld at 37%, the top federal rate, regardless of what your W-4 says.²

When Employers Use the Aggregate Method Instead

Not every employer uses the flat 22%. Some use the aggregate method, which combines your bonus with your regular pay for that pay period and calculates withholding on the total as if it were one paycheck.² The employer figures federal income tax on the combined amount using standard withholding tables, subtracts the tax already withheld from your regular wages, and takes the remainder out of the bonus.

This method often withholds more, because piling the bonus on top of a normal check can push the combined total into a higher withholding bracket for that period. That doesn’t mean you owe more tax; it just means more is held back upfront. The calculation follows your filing status and the most recent Form W-4 on file.³ You don’t get to pick which method your employer uses.

Social Security and Medicare on the Bonus

FICA taxes come out of every bonus regardless of which income tax withholding method your employer chose.

Social Security: 6.2% up to the annual wage base. For 2026, the wage base is $184,500 in total earnings. Once your combined wages and bonuses pass that figure, no more Social Security tax is withheld for the rest of the year.⁴
Medicare: 1.45% on every dollar, with no cap.⁵
Additional Medicare: An extra 0.9% once your total wages exceed $200,000 for the year.⁵

For a worker earning well under $184,500 who receives a $10,000 bonus, combined FICA on that bonus is $765: $620 for Social Security and $145 for Medicare. Add the $2,200 in federal income tax at the flat rate, and total deductions on the bonus come to $2,965.

Why 22% Withholding Isn’t the Tax You Actually Pay

The 22% flat rate is a collection tool, not your tax rate. When you file, the bonus is added to the rest of your income and taxed at whatever marginal rate applies to your total taxable income.

The 2026 federal brackets for single filers are:⁶

10% up to $12,400
12% from $12,401 to $50,400
22% from $50,401 to $105,700
24% from $105,701 to $256,225
32% from $256,226 to $640,600
35% up to the 37% threshold
37% over $640,600

For married couples filing jointly, the thresholds are roughly doubled.⁶

If your income puts you in the 12% bracket, the 22% withheld on your bonus was too much and you get the difference back as a refund. If you land in the 32% bracket, the 22% wasn’t enough and you owe the shortfall at filing.

Gift Cards, Prizes, and Other Non-Cash Bonuses

Bonuses don’t have to be cash to be taxable. Gift cards, vacation packages, electronics, and other prizes from your employer count as income at fair market value.⁷ Your employer adds the value to your wages and withholds on it just like a cash bonus.

Gift cards get treated as cash equivalents. They can’t be excluded as a low-value fringe benefit no matter how small — a $25 holiday gift card from your boss is technically taxable income. A narrow exception exists for tangible personal property (not cash, not gift cards) given as a length-of-service or safety award: up to $400, or up to $1,600 under a qualified employer plan.⁸

Ways to Lower the Tax on a Bonus

Directing more of the bonus into a pre-tax 401(k) is the most direct way to reduce the taxable portion, because traditional 401(k) contributions come out before federal income tax is calculated. For 2026, the employee contribution limit is $24,500, with an $8,000 catch-up if you’re 50 or older ($32,500 total). Workers aged 60 through 63 get a higher catch-up of $11,250 under the SECURE 2.0 Act.⁹ Because 401(k) contributions run through payroll, adjust your deferral percentage with your employer before the bonus is paid.

Other tax-advantaged options:

Traditional IRA: up to $7,500 for 2026, or $8,600 if you’re 50 or older. Deductibility depends on your income and whether you’re covered by a workplace plan.¹⁰
Health Savings Account: up to $4,400 for self-only coverage or $8,750 for family coverage in 2026, if you have a high-deductible health plan. The deduction applies whether or not you itemize.¹¹

One limit to know: pre-tax retirement contributions reduce federal income tax but not FICA. Social Security and Medicare are still calculated on the full bonus before any 401(k) deferral.

Fixing Withholding With a New W-4

If your paychecks (or your bonus) consistently have too much or too little withheld, you can submit a new Form W-4 to your employer any time. The IRS Tax Withholding Estimator recommends specific W-4 entries based on your income, deductions, and credits for the year.¹²

On the current W-4, Step 3 lets you claim tax credits to reduce withholding, and Step 4(c) lets you add extra withholding per paycheck if you expect to owe. Updating it after a bonus can keep you from either writing a large check at filing or handing the government an interest-free loan you get back as a refund.

1
State of Texas. The Texas Constitution Article 8 – Section 24-a
2
Internal Revenue Service. Publication 15 (2026), (Circular E), Employer’s Tax Guide
3
Internal Revenue Service. Publication 15-T (2026), Federal Income Tax Withholding Methods
4
Social Security Administration. Contribution and Benefit Base
5
Internal Revenue Service. Topic No. 751, Social Security and Medicare Withholding Rates
6
Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
7
eCFR. 26 CFR 1.74-1 – Prizes and Awards
8
Internal Revenue Service. Employer’s Tax Guide to Fringe Benefits
9
Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500
10
Internal Revenue Service. Retirement Topics – IRA Contribution Limits
11
Internal Revenue Service. Notice 2026-05, HSA Inflation-Adjusted Amounts
12
Internal Revenue Service. Tax Withholding Estimator FAQs