Bonus Calculator 2025
Calculate employee bonuses, performance incentives, and bonus taxes with multiple bonus structures and achievement metrics. Includes performance bonuses, profit sharing, retention bonuses, and comprehensive tax calculations for accurate net bonus amounts.
Bonus Calculator
Calculate employee bonuses, performance incentives, and net bonus amounts with tax calculations
Bonus Types & Structures (2025)
Performance Bonuses
Individual Performance
Based on personal KPIs and objectives
Team Performance
Shared team achievement bonuses
Company Performance
Based on overall company results
Sales Performance
Achievement of sales targets
Time-Based Bonuses
Annual Bonus
End-of-year performance bonus
Quarterly Bonus
Short-term performance incentives
Retention Bonus
Loyalty and tenure rewards
Sign-on Bonus
New hire incentive payment
Profit Sharing
Discretionary
Management decides distribution
Formula-Based
Predetermined profit percentage
Deferred Compensation
Retirement or vesting schedule
Stock Options
Company ownership participation
Bonus Tax Treatment (2025)
Federal Withholding
Bonuses are subject to federal income tax withholding. Employers can use either the percentage method (22% flat rate for bonuses under $1 million) or the aggregate method (combined with regular wages).
FICA Taxes
Bonuses are subject to Social Security (6.2% up to wage base) and Medicare (1.45% plus 0.9% additional Medicare tax on high earners) taxes, same as regular wages.
State Taxes
State income tax withholding varies by state. Some states follow federal guidelines, while others have specific bonus withholding rates or treat bonuses as regular income.
Year-End Reconciliation
Bonus withholding is reconciled on annual tax returns. Employees may receive refunds if too much was withheld or owe additional taxes if withholding was insufficient.
Bonus Calculation Examples (2025)
Performance Bonus
Employee: Marketing Manager
Annual Salary: $85,000
Target Bonus: 15% of salary
Performance: 120% of goals
Bonus Calculation
Team Bonus
Team: Sales Department (8 people)
Total Bonus Pool: $50,000
Distribution: Equal shares
Individual Share: $6,250
Individual Bonus Breakdown
Profit Sharing
Company: Tech Startup
Annual Profit: $2,000,000
Profit Share: 5% to employees
Employee Count: 25 people
Profit Sharing Distribution
Sign-on Bonus
Position: Senior Software Engineer
Sign-on Bonus: $25,000
State: Washington (No State Tax)
Repayment Clause: 2-year commitment
Sign-on Bonus Breakdown
Frequently Asked Questions About Bonuses
Bonuses are taxed as supplemental wages. Employers typically withhold 22% federal tax on bonuses under $1 million, plus FICA taxes (7.65%) and state taxes. The actual tax owed is calculated on your annual return and may result in refunds or additional taxes due.
Bonuses are typically discretionary payments based on performance, company profits, or achievements. Commissions are contractual payments directly tied to sales or specific transactions. Both are taxed similarly but have different payment structures.
Generally, once a bonus is earned and paid, it cannot be taken back unless there was fraud, error, or specific clawback provisions in your employment agreement. However, future bonuses can be reduced or eliminated at employer discretion.
Subtract federal withholding (typically 22%), state taxes (varies by state), Social Security (6.2%), and Medicare (1.45%) from your gross bonus. For example, a $10,000 bonus typically nets around $6,500-$7,000 depending on your state.
Important Bonus Information
Bonus calculations are subject to federal, state, and local tax withholding requirements. The IRS treats bonuses as supplemental wages, which may be subject to different withholding rates than regular wages. Actual net bonus amounts may vary based on individual tax situations, state tax rates, and employer withholding policies. This calculator provides estimates and should not be considered as tax advice. Employees should consult their HR departments and tax professionals for specific guidance on bonus taxation and withholding. Bonus payments may affect quarterly estimated tax requirements for high earners.