In Minnesota, a bonus generally has around 36% withheld before it hits your bank account: 22% for federal income tax, 6.25% for Minnesota state income tax, and at least 7.65% for Social Security and Medicare. That is withholding, not your final tax. What you actually owe on bonus income in Minnesota depends on your total yearly income, filing status, and deductions, and the difference gets sorted out when you file your return.
Federal Withholding on Your Bonus
The IRS classifies bonuses as supplemental wages, which follow their own withholding rules. Your employer will use one of two methods.
The Flat 22% Method
Most employers use the flat rate method. If your total supplemental wages for the calendar year are under $1 million, federal withholding is a flat 22%, no matter what you put on your W-4.1Internal Revenue Service. Publication 15 (2026), (Circular E), Employers Tax Guide On a $5,000 bonus, that is $1,100 out the door for federal income tax alone.
The Aggregate Method
Alternatively, your employer may lump the bonus into your regular paycheck for that period and withhold based on the combined total using your W-4.2eCFR. 26 CFR 31.3402(g)-1 – Supplemental Wage Payments Because that bloated pay period looks like a much bigger annualized salary, this method often withholds more than the flat 22%. Any excess comes back at tax time.
Bonuses Above $1 Million
If your supplemental wages from one employer top $1 million in a year, every dollar past that mark is withheld at 37%.1Internal Revenue Service. Publication 15 (2026), (Circular E), Employers Tax Guide The first million still uses the flat or aggregate method.
Minnesota State Withholding
Minnesota takes its own cut on top of the federal amount. When a bonus is paid separately from your regular wages, the Minnesota Department of Revenue permits a flat 6.25% withholding rate.3Minnesota Department of Revenue. Supplemental Payments On that same $5,000 bonus, that is $312.50.
If your employer instead runs the bonus through regular payroll, they apply Minnesota’s standard withholding tables to the combined pay-period total, which can pull more state tax than the flat rate would. Either way, this is only an estimate. Your true Minnesota tax runs through the state’s graduated brackets.
Minnesota Income Tax Brackets for 2026
Where your bonus dollars actually land depends on your total taxable income for the year.4Minnesota Department of Revenue. Income Tax Rates and Brackets
Single filers:
- 5.35% on taxable income up to $33,310
- 6.80% from $33,311 to $109,430
- 7.85% from $109,431 to $203,150
- 9.85% over $203,150
Married filing jointly:
- 5.35% on taxable income up to $48,700
- 6.80% from $48,701 to $193,480
- 7.85% from $193,481 to $337,930
- 9.85% over $337,930
If your salary already puts you in the 7.85% or 9.85% bracket, the 6.25% flat withholding will not cover your actual state tax on the bonus, and you will owe the difference. If you sit in the 5.35% bracket, 6.25% is slightly high and you should see a small refund on that portion.
Social Security and Medicare
FICA taxes apply to your bonus no matter which income tax method your employer picks.
- Social Security: 6.2% of the bonus, up to the 2026 wage base of $184,500 in total earnings. Once your combined wages for the year pass that cap, this piece stops.5Office of the Law Revision Counsel. 26 USC 3101 – Rate of Tax6Social Security Administration. 2026 Cost-of-Living Adjustment (COLA) Fact Sheet
- Medicare: 1.45% on the whole bonus, with no wage cap.5Office of the Law Revision Counsel. 26 USC 3101 – Rate of Tax
- Additional Medicare tax: an extra 0.9% kicks in once your total wages for the year exceed $200,000. Your employer starts withholding it past that point regardless of your filing status; the actual owed-versus-owed line at filing is $200,000 single or $250,000 married filing jointly.7Internal Revenue Service. Topic No. 751, Social Security and Medicare Withholding Rates
Combined, FICA takes at least 7.65% of your bonus. If you have already earned past the Social Security cap for the year, only the Medicare piece applies to the bonus.
Gift Cards and Non-Cash Awards
A holiday gift card is not a tax-free perk. The IRS treats gift cards and any cash-equivalent prize from your employer as taxable wages, and they never qualify as a minor fringe benefit no matter how small the value.8Internal Revenue Service. De Minimis Fringe Benefits The value belongs on your W-2 and is withheld like cash.
A narrow carve-out exists for tangible personal property given as a length-of-service or safety award, which can be excluded up to $400 per year, or up to $1,600 under a qualified plan. Cash, gift cards, and vacations do not qualify.
Ways to Lower the Tax on Your Bonus
You cannot dodge the tax, but you can shrink the taxable portion by routing bonus dollars through pre-tax accounts.
Route It Into Your 401(k)
Traditional 401(k) deferrals are exempt from federal income tax withholding at the time of deferral.9Internal Revenue Service. 401(k) Plan Overview If your plan lets you send part of your bonus straight into your 401(k), that money skips the 22% federal and 6.25% Minnesota withholding. The 2026 elective deferral limit is $24,500, plus an $8,000 catch-up if you are 50 or older.10Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026 FICA still applies to the deferred amount.
Fund an HSA
With a high-deductible health plan, HSA contributions made through your employer’s cafeteria plan come out of your wages before withholding is figured.11Internal Revenue Service. Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans The 2026 limits are $4,400 for self-only coverage and $8,750 for family.12Internal Revenue Service. Notice 2026-05 – HSA Inflation Adjustments Unlike a 401(k), payroll HSA contributions also skip FICA, which makes this the most tax-efficient landing spot for bonus dollars if you qualify.
What Happens When You File
Withholding is a rough estimate that gets reconciled on your return. Every dollar of wages, bonuses, and other income is combined, run through the graduated brackets, and compared to what was already withheld. Overwithheld money comes back as a refund. Underwithheld money is owed. Bonuses commonly land on the underwithheld side, either because 22% federal is below your bracket or because the 6.25% Minnesota flat rate is below your marginal state rate.
Avoiding an Underpayment Penalty
If the shortfall is large enough, the IRS charges an underpayment penalty. You are safe from that penalty if any of the following is true:13Internal Revenue Service. Underpayment of Estimated Tax by Individuals Penalty
- You owe less than $1,000 after withholding and credits.
- Your withholding and estimated payments cover at least 90% of this year’s tax.
- Your withholding and estimated payments equal at least 100% of last year’s tax (110% if your prior-year adjusted gross income was over $150,000, or $75,000 if married filing separately).
When a mid-year bonus opens a gap, you can submit a new W-4 to bump withholding on the rest of your paychecks, or send a quarterly estimated payment to both the IRS and the Minnesota Department of Revenue before the filing deadline.