The short answer
A signing bonus is taxed as "supplemental wages." Federal law requires 22% withholding on the first $1 million of bonus pay and a flat 37% on everything above $1 million, plus Medicare and your state. On a $5,000,000 bonus in a high-tax state, that can add up to close to half. It is withholding, not always the final tax: you settle up when you file.
Numbers from the KeepMyCheck calculator using 2026 tax rules. Estimates, not tax advice.
| Federal withholding (22% on first $1M, 37% above) | $1,700,000 |
| Medicare (1.45% + 0.9%) | $117,500 |
| California withholding on bonuses (10.23%) | $511,500 |
| Agent (3%) | $150,000 |
| What lands in the account | $2,521,000 |
California's bonus withholding rate is 10.23%; the real California tax at this level can be higher (top rate 13.3%). Texas and Florida residents skip the state line.
Two things can make it feel worse. First, if your total income for the year is lower than the withholding assumed, you get part of it back as a refund. Second, if you are in the top bracket and in a high-tax state, you may owe more in April. Either way, the bonus is taxed like wages, not like a gift.
Related questions
- Why did I get taxed so much on my bonus?
- Because bonuses are withheld at a flat 22% federal (37% over $1 million), plus Medicare and state tax, no matter your other income. It can be more or less than your final tax.
- Do I get the bonus withholding back?
- Sometimes. If too much was withheld compared to your real tax for the year, you get a refund when you file. If too little, you owe.