I’m dissapointed with my pitiful bonus, but I’m also shocked at my federal and state income tax. It wen’t from 9% and 2.5% respectively to 18% and 4.5%!
Have I just not noticed this happening in the past years? For comparison, I made the equivalent of an extra pay check and a half this monthly period. This 2 week period check is essentially equivalent to 2.5 of my usual 2 week period checks. And I don’t make much. Did something go wrong or is this normal?
Well, I guess that root canal I’ve been putting off, is going to have to wait another couple of months.
Was it just your bonus that got taxed heavily? Bonuses are typically taxed at the maximum amount, in other words, the government takes a shitload more of your money than they do with a normal paycheck.
You’ll get it back in your tax return and in the mean time Congress gets the interest from the float on your money. Expect a thank-you card in the mail for the gas to fly to the global warming summit (the hookers were free).
You don’t “jump brackets” if your pay moves into the next bracket then only the part of your pay that is in the higher tax bracket gets taxed at the higher rate.
As the others have said, when you get a large lump sum it is taxed as though you earned it every pay. When it comes time to do your taxes, the tax is calculated on the total you’ve earned for the year and the bonus is therefore averaged out. You will then get some tax back. It all comes out in the wash, as they say.
This used to bug the heck out of me. I’d get a $1200 bonus, and after they took the taxes out I’d end up with about $750 because policy was to tax all awards at the highest tax bracket, regardless of the amount.
