By Team SalaryCalculate · 7/22/2025
If you live in Texas and work remotely—whether for a company in-state or across the country—your bonuses are taxed the same way your regular wages are: at the federal level only. That’s because Texas doesn’t have a state income tax. So no matter where your employer is located, if you’re a Texas resident, you won’t pay state income tax on your bonus.
But that doesn’t mean your entire bonus lands in your bank account. The IRS still takes its cut. For 2025/2026, bonuses are typically taxed using one of two methods: the flat-rate method (a 22% withholding rate for supplemental wages) or the aggregate method (where your employer adds your bonus to a regular paycheck and taxes the whole amount at your usual rate). The method your employer uses can make a big difference in your take-home pay.
When you get a bonus, it’s not “free money”—at least not to the IRS. Bonuses are classified as supplemental income, meaning they’re taxed differently than your normal paycheck.
There are two main ways employers handle this:
| Method | Rate Applied | Typical Use Case | Withholding on $10,000 |
|---|---|---|---|
| Flat-Rate | 22% | Separate lump-sum bonus | $2,200 |
| Aggregate | Varies | Bonus combined with regular pay | Depends on total income |
1. Flat-Rate Method
The IRS says employers can withhold a flat 22% on bonuses (up to $1 million). This is straightforward and common when the bonus is separate from your regular pay.
Example: You get a $10,000 bonus. Your employer withholds: $2,200 for federal income tax (22%), $620 for Social Security (6.2%), and $145 for Medicare (1.45%). Net bonus: $7,035 (before other deductions).
2. Aggregate Method
Here, the bonus is added to a regular paycheck and taxed as if it's all part of your normal income. This might push you into a higher tax bracket temporarily, meaning a bigger upfront deduction.
What About Social Security and Medicare?
Bonuses are still subject to FICA taxes: 6.2% Social Security up to the 2025 wage cap of $168,600, and 1.45% Medicare (plus an extra 0.9% if you earn over $200,000).
Remote Workers and Out-of-State Employers
If you live in Texas and work remotely for a company based in a state with income tax (like California or New York), you generally shouldn’t have that state’s income tax withheld—if you're performing the work in Texas. Check your paystub and confirm your employer has your Texas residency documented correctly.
Do Signing Bonuses Get Taxed Too?
Yes. Signing bonuses are taxed the same as other supplemental income. One thing to watch for: many come with repayment clauses. If you leave your job early and repay the bonus, you may have to claim the taxes back from the IRS later.
Self-Employed? The Rules Are Different
If you're a contractor or freelancer, what looks like a bonus is just more taxable income. You'll owe self-employment tax (15.3%) and need to handle estimated payments yourself.
Edge Cases to Know
If your bonus pushes your total annual bonus income over $1 million, the portion above that gets taxed at a 37% withholding rate. Also, if you move to Texas mid-year from a state that does tax income, you might owe that state for part of your bonus based on when it was earned.
FAQs
Q: Do I pay taxes on bonuses in Texas?
A: Yes—federal only. No state income tax applies.
Q: Can I reduce the taxes on my bonus?
A: You might. Consider deferring income or contributing more to a 401(k), HSA, or other tax-advantaged accounts.
Q: What if my bonus is overtaxed?
A: You may get a refund when you file your return. The IRS only cares about your total annual tax, not how much was withheld each month.
