California bonus tax calculator (2026)

How California taxes bonuses: the supplemental method

When a California employer pays a bonus separately from a regular paycheck (the typical year-end bonus or sign-on payment), the IRS allows two methods to calculate withholding: the supplemental wages flat method and the aggregate method. Most employers use the supplemental flat method because it is administratively simpler. Under the supplemental method, the federal withholding rate is 22% on bonus wages up to $1 million per recipient per calendar year, and 37% on the portion above $1 million (per IRS Publication 15). California adds its own supplemental rate of 6.6% on cash bonuses (sometimes called "supplemental wages" by California payroll systems), or 10.23% on stock options and similar equity vesting events (per the EDD DE 4 withholding instructions).

FICA and SDI also apply. Social Security at 6.2% applies to bonus wages up to the 2026 wage base of $176,100 in cumulative wages per recipient (so bonus paid before the cap is fully withheld; bonus paid after the cap escapes the SS line). Medicare at 1.45% applies to all bonus wages with no cap. Additional Medicare Tax at 0.9% applies to wages above $200,000 single or $250,000 MFJ household. SDI at 1.1% applies to all California wages with no cap (per January 2024 SB 951). Stack everything together and combined withholding on a typical California cash bonus is roughly 36-38%, meaningfully higher than most California earners' marginal income tax rate, which is why bonuses feel "taxed harder".

Worked examples: California cash bonus take-home (supplemental method)

The table below shows withholding on common California cash bonus amounts using the supplemental method. Assumptions: federal supplemental 22%, CA supplemental 6.6%, Social Security 6.2% (assuming you have not crossed the $176,100 wage base for the year), Medicare 1.45%, SDI 1.1%. Additional Medicare 0.9% is not included because it applies only after $200,000 cumulative annual wages and only to the portion above the threshold.

Worth noting: at $50,000+ bonuses or for workers earning above $200,000 single, the Additional Medicare Tax adds another 0.9% on the portion above the threshold. The actual year-end tax may also differ from withholding, typically refunded if the worker's actual marginal rate is below 22% federal and 6.6% California, or owed if the worker is above (e.g. high earners in the 32% federal bracket pay more in actual tax than the supplemental withholding collected).

Stock options and RSUs: the 10.23% California rate

California treats stock options, RSU vesting, and ESPP qualifying disposition compensation as a higher class of supplemental wages, withheld at 10.23% (rather than 6.6% for cash bonuses). The mechanic: when an RSU vests and the employer reports the vested-share value as taxable wages, California requires the employer to withhold 10.23% of that wage amount in addition to the 22% federal supplemental rate, FICA, and SDI. So the all-in California withholding on $50,000 of vested RSU value is approximately: 22% federal + 10.23% California + 6.2% Social Security (if under wage base) + 1.45% Medicare + 1.1% SDI = approximately 41% combined withholding, leaving roughly $29,500 net. The actual tax liability depends on the worker's full annual marginal rate.

For high-earning California tech workers in the 32% or 35% federal brackets, the 22% federal supplemental withholding on RSU vesting routinely under-collects the actual federal tax owed by 10-15 percentage points. This creates the "RSU tax shortfall" that catches many tech workers off guard at year-end. The fix is either making estimated quarterly tax payments (IRS Form 1040-ES, FTB Form 540-ES) or asking payroll to apply additional withholding on subsequent paychecks. The full mechanics for equity comp are covered on the California RSU tax calculator page.

Aggregate vs supplemental: when each is used

The aggregate method calculates withholding on the bonus as if it were part of a regular paycheck. Total taxable wages for the period (regular salary + bonus) are run through the standard W-4 / DE 4 withholding tables, and the calculated withholding is reduced by the amount that would have been withheld on the regular salary alone. The result is bonus-specific withholding that reflects the worker's effective annual rate. Pro: more accurate withholding for moderate bonuses, fewer year-end surprises. Con: more complex for payroll systems, and high-earner workers may see higher per-paycheck withholding than the supplemental method.

The supplemental flat method is administratively simpler, withhold 22% federal, 6.6% California, plus FICA and SDI. Per IRS Publication 15, employers must use the supplemental method (not aggregate) if the bonus is identified separately from regular wages and the employer has historically used the supplemental method for similar payments. Most California employers pay year-end bonuses on a separate paycheck and use the supplemental method by default. Workers who want to know which method their employer uses can check the bonus pay stub: if the federal withholding line is exactly 22% of the bonus amount, the supplemental method was used.

Year-end reconciliation: getting the bonus tax right

Withholding is timing, it is not the actual tax. At year-end, your federal Form 1040 and California Form 540 calculate your actual tax liability using your full annual income (regular wages + bonus + any other income) and your filing status. Whatever was withheld via supplemental or aggregate method is credited against that actual liability. If withholding exceeded actual tax, you receive a refund. If withholding was below, you owe the balance. For workers in the federal 22% bracket and California 9.3% bracket on a $25,000 bonus, the supplemental withholding (22% + 6.6% = 28.6% on income tax, plus FICA + SDI of 8.75%, total 37.35%) often closely matches actual tax owed.

For workers in the federal 24%, 32%, or 35% bracket, the 22% federal supplemental withholding under-collects. For workers in the federal 10% or 12% bracket, the 22% supplemental over-collects (refund at year-end). For high earners with substantial bonuses or RSU vesting events, the under-collection can be material, a $200,000 bonus to a 32% federal-bracket worker is under-withheld by 10% × $200,000 = $20,000, which becomes a year-end balance owed. The IRS may also charge an underpayment penalty if estimated quarterly payments were not made and total withholding was below the safe-harbor threshold (90% of current year tax or 100-110% of prior year tax). Quarterly estimated payments use IRS Form 1040-ES and FTB Form 540-ES.

Related California paycheck pages

California bonus tax, common questions

Bonus tax mechanics on this page reflect 2026 published rates from IRS Publication 15 (federal supplemental withholding), California EDD DE 4 (California supplemental withholding), the SSA October 2025 COLA notice (Social Security wage base), and FTB Publication 1005 (California pre-tax treatment). Withholding rates are not actual tax, your year-end Form 1040 and Form 540 reconcile. Consult a CPA about your circumstances.