{"id":14885,"date":"2024-12-05T08:00:00","date_gmt":"2024-12-05T14:00:00","guid":{"rendered":"https:\/\/www.hrblock.com\/tax-center\/?p=14885"},"modified":"2025-09-08T10:08:38","modified_gmt":"2025-09-08T15:08:38","slug":"tax-on-bonus","status":"publish","type":"post","link":"https:\/\/www.hrblock.com\/tax-center\/income\/other-income\/tax-on-bonus\/","title":{"rendered":"Holiday bonus taxes"},"content":{"rendered":"\n

Holiday bonus, Christmas bonus, signing bonus. What ever the reason you might be getting a bonus, you’re likely thinking first about how you might use that windfall. Then when the check hits and the amount is lower than you remember and you wonder, “Are holiday bonuses taxed? Are Christmas bonuses taxable?”<\/p>\n\n\n

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The short answer is yes. These and other types of bonuses are taxable. Read on as we unpack the concept of bonuses and taxes. <\/p>\n\n\n\n

Tax on bonuses 101<\/strong><\/h2>\n\n\n\n

A bonus can be awarded in the form of cash, gifts cards, or gifts. While it\u2019s always exciting to be surprised by a \u201cgift\u201d from your employer, there are important tax consequences for any random cash or holiday bonus received. Let\u2019s cover some important points regarding the tax on your bonus\u2014like the bonus tax rate for 201, signing bonus tax, and tax reporting on bonuses.<\/p>\n\n\n\n

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How much are bonuses taxed?<\/strong><\/h2>\n\n\n\n

Long story short, bonuses are taxed differently, depending on the form of payment and amount. Read on for more details\u2026<\/p>\n\n\n\n

The cash bonus<\/strong><\/h3>\n\n\n\n

One of the most common end-of-year bonus delivery methods is cash or check from your employer. If your employer does this, the bonus amount should be added to the W-2 you receive in January. A cash bonus is treated similarly to wages, and is taxed as such. You will report the bonus as wages on line 1 of Tax Form 1040. (Or use the expertise of a tax pro<\/a> to help you do so.)<\/p>\n\n\n\n

Signing bonus tax<\/strong><\/h3>\n\n\n\n

Recently accepted a new job? Signing bonus taxes would fall in the above category if received via cash gift.<\/p>\n\n\n\n

Non-monetary gift bonuses<\/strong><\/h3>\n\n\n\n

If you receive a non-monetary gift from your employer every year \u2014 a holiday ham, ornament, or even a theater or sporting event ticket \u2014 you likely will not be taxed on this gift. This category of gifting is often referred to as \u201cde minimis fringe benefits\u201d and is excluded from your income.<\/p>\n\n\n\n

In most cases, your employer will determine whether a non-monetary gift is a de minimis fringe benefit. A de minimis fringe benefit is occasional or unusual in frequency, and small enough in value to make the accounting for it unreasonable or impractical.<\/p>\n\n\n\n

The de minimis fringe benefit rules don\u2019t apply to gifts of cash or cash equivalents. Therefore, the rules discussed above in the \u201ccash bonuses\u201d section apply to any gift of cash received by an employer.<\/p>\n\n\n\n

Gift card bonuses<\/strong><\/h3>\n\n\n\n

Some employers surprise their employees with a gift card around the holidays or after reaching an important sales milestone. In the eyes of the IRS, gift cards are treated as cash equivalents and are taxed the same as cash or a check.<\/p>\n\n\n\n

Withholding taxes on bonuses<\/strong><\/h2>\n\n\n\n

It\u2019s important to understand the withholding rules for bonuses because the tax liability on your tax return may be affected if you under-withheld throughout the year.<\/p>\n\n\n\n

Even though bonuses are often taxed at the same rate as your wages, there may be instances of differences. For example, if your bonus was paid separate from your normal paycheck, like a check or cash at the holiday party. Different tax treatment may also occur if you are lucky enough to receive a bonus of more than $1 million.<\/p>\n\n\n\n

Bonus tax rate – brackets <\/strong><\/h2>\n\n\n\n

Tax on a bonus equaling less than $1 million<\/strong><\/p>\n\n\n\n

The taxation on bonuses less than $1 million depends on whether the bonus is included in the same paycheck as your other wages or in a separate paycheck.<\/p>\n\n\n\n

Bonuses paid with your typical wages, and not separately identified, will be taxed in the same manner as your usual wages. However, by combining the two for that tax period, your tax withholding percentage for that period may increase as if that was the amount you would be paid each paycheck for the remainder of the year. If the bonus is paid or identified separately, it can be taxed at a flat rate of 22%.<\/p>\n\n\n\n

Either way, the paying of the supplemental wages will affect your tax withholding for that period, so be prepared. <\/strong><\/p>\n\n\n\n

Tax on a bonus over $1 million<\/strong><\/h3>\n\n\n\n

Any excess wages over $1 million will be taxed at a rate of 37%.<\/p>\n\n\n\n

Tax reporting of bonuses \u2013 Where do you start?<\/strong><\/h2>\n\n\n\n

Although a cash bonus may receive a different withholding treatment, it should still be reported on your W-2<\/a>.<\/p>\n\n\n\n