How Are Bonuses Taxed in Texas? A Complete 2025 Guide for Employees
By Team SalaryCalculate · 7/22/2025
Congratulations on Your Bonus — Now Let’s Talk Taxes
So, you’ve just received a bonus from your employer — congratulations! But before you start spending, it’s crucial to understand how that bonus will be taxed, especially in Texas, where tax rules differ from many other states.
Here’s the good news: Texas has no state income tax. That means your bonus isn’t taxed at the state level. But federally? You’ll still owe the IRS.
What Is a Bonus, According to the IRS?
The IRS classifies bonuses as supplemental income — a category that includes overtime, commissions, severance pay, and awards. This type of income is taxed differently than regular wages and is subject to federal withholding.
How Are Bonuses Taxed Federally?
The IRS allows two methods for taxing bonuses:
1. Percentage Method (Most Common)
A flat 22% withholding is applied on bonuses under $1 million.
Bonuses over $1M are taxed at 37% on the amount above $1M.
This method ignores your usual tax bracket and deductions.
2. Aggregate Method
Your bonus is added to your regular paycheck.
Taxes are calculated as if it’s all one payment, based on your W-4 and marginal tax rate.
You may owe more upfront, but this method accounts for deductions.
For full details, see IRS Publication 15 (2025)
Bonus Tax Example: Percentage vs. Aggregate
| Method | Base Salary | Bonus | Tax Withheld | Take-Home Bonus |
| Percentage Method | $80,000 | $5,000 | $1,100 (22%) | $3,900 |
| Aggregate Method | $80,000 | $5,000 | $1,250 (25%) | $3,750 |
Try the Bonus Calculator to calculate your own numbers.
Do You Pay State Tax on Bonuses in Texas?
No. Texas does not tax earned income, including bonuses. This applies to:
Annual bonuses
Signing bonuses
Sales commissions
However, federal tax applies no matter where you live.
Learn more: Do You Pay State Tax on Bonuses in Texas?
How to Maximize Your Bonus Take-Home
Here are three smart ways to reduce what the IRS takes:
Contribute to Your 401(k)
If your employer allows it, contributing some of your bonus to a 401(k) can lower your taxable income.
Ask to Delay Your Bonus to a New Year
If you're already in a high bracket, receiving it after April 6 (start of the new tax year) could reduce your overall liability.
Use Withholding Adjustments on Your W-4
If you expect over-withholding, update your W-4 to reflect accurate deductions.
Want to Know Your Net Bonus Pay?
Use our Net Salary Calculator. It accounts for:
Your base salary and bonus
Federal tax thresholds for 2025/26
401(k), HSA, and other deductions
Frequently Asked Questions
What happens if my employer doesn’t withhold taxes from my bonus?
You’re still required to pay taxes. You may need to make estimated quarterly payments to the IRS.
Can I control how my employer taxes my bonus?
Not really. The employer chooses between the percentage method and the aggregate method.
Is it better to receive my bonus in a new tax year?
It can be. If you’re near a new tax bracket or had high earnings this year, delaying might reduce your tax liability.
Summary
Understanding how bonuses are taxed is essential for budgeting and financial planning. While Texas spares you state tax, the IRS still takes its cut — either 22% upfront or your usual rate through the aggregate method.
Want personalized results? Use the Bonus Calculator or Net Salary Calculator to model your take-home bonus based on 2025 rules.
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