New Jersey Bonus Tax Calculator:
Employers' Trusted Tool for Accurate Bonus Payments
The bonus tax calculator from Beyond, located at the top of this page, assists employers in quickly estimating the take-home pay (or net pay) employees should receive for bonuses.
Does New Jersey Tax Bonuses?
Yes. In New Jersey, bonuses are considered supplemental wages and are subject to the same withholding as regular income.
Unlike many states, New Jersey does not have a flat supplemental rate — instead, employers must apply the progressive income tax rates, which range from 1.4% to 10.75% depending on the employee’s total annual income.
Commissions and other supplemental payments are treated the same way as standard wages for withholding purposes.
How to Calculate Bonus Tax in New Jersey
When a bonus is paid together with regular wages, New Jersey requires employers to calculate withholding using the aggregate method — combining the bonus and regular pay to determine the appropriate tax bracket.
If a bonus is paid separately, the employer should use the employee’s expected annual rate (based on total earnings) to select the appropriate tax percentage.
The Beyond HCM calculator above simplifies this process by allowing you to select the employee’s marginal bracket (from 1.4% to 10.75%) to estimate state withholding on separately paid bonuses.
What Is the Bonus Tax Rate in New Jersey?
New Jersey applies a progressive state income tax rate that ranges from 1.4% up to 10.75% based on taxable income.
Employers must also withhold federal supplemental taxes at 22% (or 37% for total bonuses above $1 million in a calendar year), plus FICA taxes (Social Security and Medicare).
This means that the combined withholding on a separately paid bonus typically falls between 23.4% and 33%, depending on the employee’s income bracket and FICA limits.
How Can Employers in New Jersey Pay Bonuses to Employees?
Bonuses can be issued using any standard payroll method, such as:
– Check
– Direct deposit
– Pay card
Employers must ensure all applicable federal and state taxes are withheld and that all payments are accurately reported on Form W-2.
How Do Bonuses Work in New Jersey?
Bonuses are treated as taxable wages for both federal and state purposes.
If paid separately, the employer applies the estimated state rate corresponding to the employee’s income bracket; if combined with regular wages, standard withholding tables apply.
Bonuses are also subject to Social Security and Medicare (FICA) taxes.
Why Are Bonuses Taxed Differently Than Standard Pay?
In reality, they are not taxed differently under New Jersey law — bonuses are simply supplemental wages taxed according to the employee’s marginal rate.
However, federal law allows employers to use a flat 22% supplemental rate for convenience when calculating federal withholding on separate bonus payments.
How Much Tax Is Taken Out of a Bonus in New Jersey?
Here’s a general example of how bonus withholding might look:
– Federal: 22%
– New Jersey (approximate bracket): 1.4% to 10.75%
– Total (excluding FICA): 23.4% to 32.75%
Including Social Security (6.2%) and Medicare (1.45%), the total effective withholding may range from 31% to 40%, depending on the employee’s income and chosen bracket.