New Tax Law - how if affects bonuses

j. madden's picture
Rank: Gorilla | 547

Here's a question that may affect most on this forum:

The current federal tax laws assess a flat tax on bonus income, which is highly annoying because that is a large chunk of my yearly compensation. How does the new tax code affect this? Will we get to take home a larger portion of our bonuses next year? I'm sick of getting screwed out of 25-35% of my bonus.

Comments (25)

Best Response
Dec 22, 2017

Bonuses are ordinary income for tax purposes my friend. Most companies just do a 25%-35% tax rate because their payroll software sees a check for that amount and annualizes your income based on your bonus for that payment period. So when tax time comes, if you are in the 22% tax bracket and you paid 25% you overpaid into your taxes, and you'll be refunded come tax time.

    • 4
Dec 22, 2017

This.

You will see the same scenario for any sort of bonus or lump-sump payment (e.g. sign-on bonus or severance).

    • 2
Dec 22, 2017

I fucking hate the government taking half my bonus check....total bull shit. Makes me so angry.

I bet if Bernie Sanders were president, it would be closer to 90% gone because you know,,.we need to spread the wealth around to better equalize society!

    • 2
    • 3
Jan 3, 2018

I'm no fan of Bernie, but he did not call for a 90% top tax bracket. Under his proposal, the top tax bracket would be 52% for all income over $10 million a year.

http://www.bernietax.com/#0;0

    • 2
Jan 3, 2018

He didn't officially propose it, but he insinuated that he doesn't have a problem with it and many of his supporters have argued for it.

Jan 6, 2018

This is why really rich people work for themselves. You don't get rich (except in rare instances) working for someone else.

The tax rate of a business owner is a small fraction of what W2 worker make.

Jan 6, 2018

this. in the UK you're better off working for yourself if you make over 100k sterling (if you could match employment income).

Dec 22, 2017

How are you still alive? That new tax bill was going to kill everyone.

    • 2
    • 1
Dec 23, 2017

It will only kill poor ppl

    • 1
Jan 5, 2018

Poor, transgender people of color. All of them - dead. Instantly.

"When you stop striving for perfection, you might as well be dead."

    • 1
Dec 23, 2017

25-35%? In NYC? That seems a little low...

Dec 23, 2017

Only 25-35%? My marginal rate is 51%..... :/

Dec 23, 2017

Haha

Jan 3, 2018

40% Income + 2% NI + 9% student loan?

Jan 2, 2018

I think the 25% is less than the old way. My bonus this year was taken out at, like, a 40% rate. I'm generally in around the 33% bracket, net across the year.

Jan 3, 2018

How do you feel about the poor ppl who will die so that you could get more of a bonus? But hey poor ppl are such a drag, why don't they all die so rich ppl don't have to pay any taxes

    • 1
    • 6
Jan 3, 2018

is this a serious comment?

    • 4
Jan 2, 2018

If you want to take home more of your bonus, check w/ your payroll dept to see how they handle bonuses. Many use the "supplemental rate" of 25% as others have mentioned, but a lot of times you have the option to use your normal allowances as specified on your W-4 instead (either method is fine from the IRS's perspective as long as your bonus is <$1mm).

If they will let you use your allowances, figure out how many allowances you need to hit your target after tax number by using page 44 of IRS Publication 15. Submit a new W-4 prior to bonus time (don't forget to change it back afterwards) and enjoy the extra cash.

Jan 5, 2018
Comment
    • 1