An annual bonus is cash paid once a year, typically in the first quarter, for the previous year's work. It is usually described as a target, for example 15% of base salary, and the actual amount is that target multiplied by a company factor and sometimes an individual factor. A 15% target on a $120,000 salary is $18,000 at target; a strong year might pay 120% of that and a weak one 60%.
The word target is doing a lot of work. It is not a guarantee. Company performance, budget, and manager discretion all move the number, and some years pay zero. That is why the safest way to plan around a bonus is to count it only for things that can wait: a goal you can push out, a lump sum toward a purchase, an extra debt payment.
Bonuses are taxed as supplemental wages, with 22% federal withholding (2026) plus payroll and state taxes, so the deposit is noticeably smaller than the headline. Many plans also require you to be employed on the payment date, not just through the year it covers, which matters if you are planning a move in January or February.
The common mistake is folding the target into monthly spending as if it were salary. In Allocate, a bonus is an expected income event on its expected date, and it can be matched to a specific goal so the goal is funded when the money lands and not before.