---
title: Supplemental wages (and supplemental withholding) — what it means and why it matters | Allocate AI
description: Pay that is not regular salary, like bonuses, commissions, and vested stock, which the IRS lets employers withhold on at a flat 22% rate (2026).
canonical: https://allocateai.io/glossary/supplemental-wages
site: Allocate AI — https://allocateai.io
---

# Supplemental wages (and supplemental withholding)

Pay that is not regular salary, like bonuses, commissions, and vested stock, which the IRS lets employers withhold on at a flat 22% rate (2026).

Supplemental wages are any pay outside your regular salary: bonuses, commissions, vested RSUs, exercised NSOs, severance, and similar lumps. The IRS gives employers a shortcut for withholding on them. Instead of running the amount through your W-4 settings, they can withhold a flat 22% for federal income tax, rising to 37% on supplemental pay above $1 million in a year (2026). Social Security, Medicare, and state tax still apply on top.

The flat rate is a convenience, not an estimate of what you owe. If your total income puts you in the 22% bracket, it lands close. If you are in the 32%, 35%, or 37% bracket, the 22% withheld leaves a gap that you settle on your tax return. On a $60,000 bonus for someone in the 35% bracket, withholding covers $13,200 but the tax is closer to $21,000, so about $7,800 is due in April.

The reverse can happen too. Someone in the 12% bracket who receives a big bonus is over-withheld and gets a refund.

The common mistake is reading the deposit and assuming taxes are handled. For anyone with meaningful bonus or stock income and a marginal rate above 22%, the deposit is not fully spendable. Setting aside the difference, or adjusting the W-4 to withhold extra from salary, closes the gap before it becomes a bill.

[Try the RSU Tax Calculator →](https://allocateai.io/calculators/rsu-tax)

## Related terms

- [Withholding gap](https://allocateai.io/glossary/withholding-gap) — The difference between the tax your employer took out during the year and the tax you actually owe, which becomes a bill or a refund in April.
- [RSU (restricted stock unit)](https://allocateai.io/glossary/rsu) — A promise from your employer to give you shares of company stock on a future date, as long as you are still there when that date arrives.
- [Annual bonus](https://allocateai.io/glossary/annual-bonus) — A once-a-year cash payment based on company and individual performance, usually expressed as a target percentage of base salary.
- [Marginal vs effective tax rate](https://allocateai.io/glossary/marginal-vs-effective-tax-rate) — Your marginal rate is the tax on your next dollar of income; your effective rate is total tax divided by total income, and it is always lower.

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Allocate AI is a budgeting and financial-planning app: link your accounts, say what you want in plain words, and it writes the plan and stages every change for your approval. Read more at https://allocateai.io or see all pages in https://allocateai.io/llms.txt.