However, if an employer uses the aggregate tax method ,that does not mean you will end up paying more tax on your bonus. This is when the bonus is issued with your regular salary payment and you are taxed at that higher rate. The other way an employer can withhold bonus tax is through the aggregate method. This method is used when the employer pays the bonus and withholds the California bonus tax rate of 10.23% and 22% federal flat rate. The first option is called the percentage method and it’s the simplest way to pay bonuses.

When it comes to the employer paying taxes on the bonus, there are two ways a business owner may choose to do so. In some cases, bonus income is subject to additional taxes, including social security and Medicare taxes. For example, if you earned a bonus in the amount of $5,000, you would owe $511.50 in taxes on that bonus to the state of California.

In California, bonuses are taxed at a rate of 10.23%. Bonuses are typically considered supplemental income and that is taxed at a different rate. Many believe that bonus pay is just like a regular paycheck and is added to your regular income and taxed at that rate. Like regular pay, bonuses are subject to both federal and state tax. Let’s look at how bonuses are taxed in California. Additionally, the tax rates can vary by state. However, that excitement can often lead to disappointment when you realize you not only have to pay taxes on the bonus, but oftentimes, it’s more tax than expected. There’s always something very exciting when you hear you’ll be receiving a bonus from your employer.

California income tax brackets