When Is the Best Time to Receive a Bonus in Texas for Tax Efficiency?

By Team SalaryCalculate · 7/22/2025

If you’re working in Texas and expecting a bonus, timing can seriously affect how much of it you keep. Texas doesn’t have a state income tax, which is a win. But your bonus is still subject to federal income tax, Social Security, and Medicare. And here’s the kicker: bonuses are often taxed higher than your regular paycheck — unless you plan ahead.

For most people, the best time to receive a bonus is earlier in the year when your year-to-date earnings are lower. That’s because the IRS uses withholding tables based on your total earnings so far. A big bonus late in the year could push you into a higher tax bracket — even temporarily — triggering higher withholding. That’s money you might get back at tax time, but it’s less in your pocket now.

If you want to see the impact instantly, try the Texas bonus calculator. It breaks down taxes and shows what you’ll take home, depending on when you get your bonus.

Why Bonus Timing Matters

Let’s get this straight: it’s not about what tax rate you’ll owe in April. It’s about what your employer withholds now.

The IRS gives two ways to handle bonus pay:

Your employer decides which method to use. But timing can still affect how it plays out, especially with the aggregate method.

Let’s say…

The IRS Bonus Withholding Rules (2025)

Here’s what applies federally:

Texas doesn’t have a state income tax, so no state deduction there. But Social Security and Medicare still apply.

To explore how this adds up, use the Texas net salary calculator. It lets you include bonuses and adjust timing, so you can compare scenarios.

• Aggregate method: Adds your bonus to your latest paycheck and taxes it all together using the standard tax tables. Most common.
• Percentage method: Taxes your bonus at a flat 22% (for 2025). Employers can choose this for separate bonuses.

Your employer decides which method to use. But timing can still affect how it plays out, especially with the aggregate method.

Let’s say…

• Your salary is $80,000.
• You get a $10,000 bonus in December.
• With year-to-date earnings already at $80K, the bonus pushes you into higher withholding territory.
• Had you received that same bonus in February — before much of your regular salary hit — you may have avoided that bump in tax withholding.

Best Months to Receive a Bonus

There’s no one-size-fits-all answer, but here’s a general rule:

The earlier in the calendar year you get the bonus, the better your shot at lower withholding (especially if your employer uses the aggregate method).

That said, some other timing strategies might make sense too:

Early Year (January–March)

• Lower year-to-date income → potentially lower withholding
• More time to adjust your W-4 if needed
• Ideal if you're planning big expenses early in the year

Mid-Year (April–August)

• Withholding gets more predictable
• Helpful if you want to use the bonus for summer expenses or investing

Late Year (September–December)

• Risk of bumping into a higher withholding bracket
• Less time to adjust your taxes if it throws things off
• Might result in a refund later, but less cash upfront

Real-World Example: Bonus Timing Impact

Let’s break it down.

Scenario 1: February Bonus

Scenario 2: December Bonus

Same bonus. Bigger withholding. Why? Higher YTD earnings signal a higher annualized income to the IRS tables. Try it yourself using our Texas bonus calculator.

Other Factors That Affect Bonus Taxes

• Overtime or commission? If you earn variable income, it may shift how your employer calculates withholding.
• Multiple bonuses? Each one may be taxed separately.
• Deferred comp or RSUs? These often have their own tax rules and vesting schedules.
• 401(k) or HSA contributions? These reduce your taxable income — consider increasing them in a bonus month.
• Already hit Social Security cap? No SS tax on bonus once your YTD earnings pass $168,600 in 2025.

Should You Ask to Delay or Advance a Bonus?

You can ask — and some employers may be flexible, especially at smaller companies. Reasons to delay or move a bonus:

• Avoid entering the Additional Medicare Tax threshold ($200K+).
• Hit a lower total tax bill for the calendar year.
• Shift income into a lower-income year (if, say, you’re quitting or retiring).

But timing isn’t everything. The way a bonus is taxed also depends on how your employer processes it — not just when.

Planning Tip: Adjust Your W-4

If you know a big bonus is coming, you can submit a new W-4 form to temporarily increase or decrease your withholdings for that period. Then revert to normal afterward.

• You expect a $15,000 bonus in June.
• You want less taken out.
• On your W-4, you might increase allowances or add deductions.
• After June, you refile your W-4 to reset.

Always talk to HR or payroll before doing this.

FAQs

• Is bonus income taxed higher in Texas? — Not directly. Texas has no state income tax. But the federal government may withhold more from bonuses, especially if your total income is high.
• Can I reduce tax on my bonus with retirement contributions? — Yes. Contributing more to a 401(k) or HSA during your bonus month can reduce taxable income.
• Do I get the overpaid tax back at the end of the year? — Often, yes — especially if too much was withheld on a bonus. It’ll show up as a refund when you file.
• What if I earn over $200,000? — You’ll pay an extra 0.9% Medicare tax on income over $200K (single filers), including bonuses.

Bottom Line

In Texas, the smartest time to get a bonus — for tax purposes — is typically early in the year. It’s when your total earnings are lowest, which can mean lower withholding. But if your employer uses flat-rate withholding, timing matters less.

Still, it’s always smart to model different scenarios. Try the Texas bonus calculator to see how timing, earnings, and tax rules change your take-home pay. And if your bonus is big, consider using the Texas net salary calculator to plan your entire year. Want to understand more? Check out our guide on how a bonus affects your paycheck in Texas.