22% vs 37% supplemental wage withholding, explained

IRS Publication 15-T defines a “supplemental wage” as compensation paid in addition to regular wages — most commonly bonuses, commissions, severance, and RSU vests. The rule for federal withholding on supplemental wages is straightforward, but the threshold trips people up.

The two rates

• 22% on the first $1,000,000 of supplemental wages paid to you by a single employer in the calendar year.
• 37% on the portion above $1,000,000.

The threshold is per-employer, per-year

If you change jobs mid-year, both employers reset the $1M counter independently. That means you could legitimately have $1.8M in supplemental wages with $0 paid at 37% — until you file and reconcile against your true marginal rate, which will treat the full amount as ordinary income.

How the calculator handles a vest that crosses the threshold

If your YTD supplemental wages going into a vest are $800k and the vest is $400k, the first $200k of the vest is withheld at 22% and the next $200k at 37%, for a blended rate of 29.5%. The calculator above models this exactly.

Why a 37% rate is still not enough at the very top

Once your total taxable income passes the top federal bracket ($626,350 single in 2025), every additional dollar is taxed at 37% federal — but you also owe Additional Medicare 0.9% on wages above $200k (single) and state income tax of up to 13.3% in CA. The 37% supplemental rate alone leaves a small but meaningful gap at the very top.