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Bonuses are withheld at a higher rate, not taxed at a higher rate. You will get it back when you file your taxes.
Pro
@Lawyer 1, that’s part of the problem and the special interest groups talking 😄
Why do I need a deduction in the first place, what’s the point of taking my money to give it back to me later? Just tax me less and call it a day or create a more standardized tax system.
I’m all for simplification, tax at the appropriate rate for my income and I’m happy. Don’t make me jump through hoops to prove I fall under a special category and deserve to be taxed less as a result.
Rising Star
Bonus. The only way the government can get an interest free loan from its citizens
You got your bonus today?
Did your bonus put you in a higher tax bracket?
That shouldn’t be the case. The bonus wasn’t that substantial
Bonuses are typically withheld at flat 22% rate plus 7.5% fica taxes, and with state taxes, 37% sounds about right
It’s just the taxes. 401k deduction is the same. The federal and state taxes are deducted at a higher percentage.
Do we really get back the higher taxes on bonus back during filing? I didn’t know this. Could someone clarity?
Your stated tax rate (what gets removed from paycheck) is not the same as your effective rate, because tax credits and deductions lower your total taxable income, thus lowering your tax and tax rate. So if your standard tax deduction is 25% but your effective rate on your return is 20%, that delta gets returned via tax refund.
I’m pretty sure it’s antiquated but for some reason bonuses have a higher tax deducted. Unless your bonus is massive and moves you into another tax bracket, odds are you’ll get that delta back at the end of the year.