Taxes on a bonus over $1 million
Large bonuses — equity cliffs, deal bonuses, retention awards, carried-interest-style payouts paid through payroll — run into a different set of withholding rules than everyday bonuses. Three things change once the numbers get big: federal withholding switches to 37% above $1 million, Social Security stops, and Medicare goes up.
The 37% mandatory rate
IRS Publication 15 (2026): if supplemental wages paid to an employee during the calendar year exceed $1 million, "the excess is subject to withholding at 37% (or the highest rate of income tax for the year)," and the employer must use 37% "without regard to the employee's Form W-4." The $1 million is counted per employer for the year, including all businesses under common control, and it counts every supplemental payment — earlier bonuses, commissions and taxable fringe benefits treated as supplemental.
The switch happens mid-payment. If you've already received $700,000 in bonuses this year and a $600,000 bonus arrives, the first $300,000 of it is withheld at 22% and the last $300,000 at 37%: $177,000.00 of federal income tax in total. Enter prior bonuses in the "Bonuses already paid this year" field to see this in the calculator.
Social Security stops, Medicare rises
Social Security's 6.2% applies only up to the 2026 wage base of $184,500, so most seven-figure earners have already hit it before the bonus arrives. Medicare has no cap, and employers must withhold an extra 0.9% Additional Medicare Tax on wages above $200,000 in the calendar year — for every employee, regardless of filing status. On a $2 million bonus for someone with $300,000 of wages already this year, Medicare withholding is $47,000.00 (2.35% of the bonus).
A $2 million bonus in six places
Same employee: $500,000 salary paid biweekly, $300,000 already earned this year, no earlier bonuses, single, a $2,000,000 bonus paid separately:
| Where | Federal | State + local | Other | Net check |
|---|---|---|---|---|
| Texas | $590,000.00 | $0.00 | $47,000.00 | $1,363,000.00 |
| California | $590,000.00 | $204,600.00 | $73,000.00 | $1,132,400.00 |
| New York (NYC resident) | $590,000.00 | $319,000.00 | $47,000.00 | $1,044,000.00 |
| Massachusetts | $590,000.00 | $155,434.00 | $47,000.00 | $1,207,566.00 |
| Illinois | $590,000.00 | $99,000.00 | $47,000.00 | $1,264,000.00 |
| New Jersey (monthly payroll) | $590,000.00 | $233,014.71 | $47,000.00 | $1,129,985.29 |
State rules that matter at the top
- Massachusetts withholds 9% instead of 5% on the part of a bonus that takes annualized wages plus bonuses above $1,107,750 — the 2026 inflation-adjusted threshold for its 4% surtax on income over $1 million (Circular M, Rev. 12/25).
- California withholds 10.23% on bonuses, and its 1.3% State Disability Insurance has had no wage ceiling since January 1, 2024, so SDI alone on a $2 million bonus is $26,000.
- New York uses its 11.70% supplemental rate, plus 4.25% for New York City residents; New York's Paid Family Leave contribution is capped at $411.91 for 2026, so it stops early in the year for high earners.
- New Jersey runs a separately paid bonus through the pay-period rate tables without allowances, so most of a seven-figure bonus lands in the 11.8% top bracket.
- Maryland withholds an annual bonus at its 6.50% top rate plus the county's highest local rate, 8.75%–9.80% combined.
Withholding vs. the final bill
At this income level the top federal bracket is 37% for 2026 (single filers above $640,600 of taxable income), so 22% withholding on the first $1 million of bonuses usually leaves a balance due. Many recipients make an estimated payment or raise withholding on the rest of their pay. This guide shows how to estimate the gap.