How Much of My Bonus, Inheritance, or RSUs Will I Actually Keep After Taxes?
The trap: withholding is not your tax bill
Here's the misunderstanding that burns people every April. When your employer pays a bonus, it's a 'supplemental wage,' and the IRS lets employers withhold federal tax on it at a flat 22% rate (38% on amounts over $1 million). Many people see 22% withheld and assume that's the tax.
It isn't. A bonus is ordinary income, taxed at your marginal rate along with the rest of your income. If your marginal bracket is 32%, but only 22% was withheld, you're quietly short 10 percentage points — a gap you'll owe at tax time. On a $50,000 bonus, that's a $5,000 surprise you never saw coming. See the exact size of your under-withholding before it becomes an April shock in the Bonus Withholding Gap calculator.
How each windfall type is really taxed
The single biggest driver of what you keep is what kind of windfall it is:
- Cash bonus: Ordinary income at your marginal rate, plus Social Security and Medicare, plus state tax. Withheld at a flat 22% federal, which often under-collects.
- RSUs (at vesting): The market value on the vest date is ordinary income — same treatment as a bonus, withheld the same flat way, same under-collection risk. If you hold the shares and they rise, that later gain is a separate capital gain.
- Cash inheritance: Generally not taxable income to you at the federal level. Estate tax, if any, is paid by the estate before you receive anything.
- Inherited retirement account (pre-tax): Not taxed when inherited, but every withdrawal is ordinary income to you — and post-2019 rules often require the account be emptied within 10 years.
- Home or business sale: Capital gains on the profit, taxed at lower long-term rates if held over a year, minus any exclusion you qualify for.
Two windfalls of the same headline size can leave you with wildly different take-home. Run your specific type and amount through the Windfall Tax Calculator to see the real net.
Marginal versus effective: you don't lose half of it
A comforting truth: being 'in the 32% bracket' does not mean 32% of your whole windfall vanishes. The U.S. system is marginal — each bracket's rate applies only to the dollars inside that bracket. Your effective rate (total tax ÷ total income) is always lower than your top marginal rate.
But a windfall can still push some of your income into a higher bracket than usual, because it stacks on top of your normal earnings. So the right question isn't 'what's my bracket?' — it's 'what marginal rate applies to these specific extra dollars, on top of everything else I earned this year?' That's the number that determines your real take-home on the windfall.
How to avoid the April surprise
Three defenses keep a windfall from becoming a tax-time shock:
- Wall off the estimated tax immediately. The moment the money lands, move your estimated true tax into a separate high-yield account and don't touch it. You never owned that portion.
- Consider an estimated payment. If the under-withholding is large, making a quarterly estimated tax payment to the IRS can avoid an underpayment penalty on top of the bill.
- Adjust withholding for the rest of the year. You can ask payroll to withhold extra from remaining paychecks to close the gap before April.
The theme is the same as every windfall decision: know the real number before you plan around the fake one.
A worked example: the take-home on a $50,000 bonus
Here's a $50,000 cash bonus for someone whose salary already puts these extra dollars in the 32% federal marginal bracket, in a state with a 5% income tax, with the usual payroll taxes. Numbers are illustrative — your brackets, state, and Social Security wage base will differ.
| Line | Rate | Amount |
|---|---|---|
| Gross bonus | — | $50,000 |
| Federal income tax (marginal 32%) | 32% | −$16,000 |
| Social Security + Medicare (approx.) | ~1.45–7.65% | −$1,500 |
| State income tax | 5% | −$2,500 |
| True take-home | — | $30,000 |
| What was actually withheld (flat 22% fed + SS/Med + state) | — | $35,000 withheld → only $15,000 total tax withheld... see gap |
| Under-withholding gap owed in April | 10 pts | ≈ $5,000 |
The headline said $50,000. The reality is roughly $30,000 in your pocket — and a $5,000 bill waiting in April because the flat 22% federal withholding under-collected against your 32% marginal rate. Plan around the $30,000, wall off the $5,000, and the bonus can't ambush you.
Frequently asked questions
Why is my bonus taxed so high — is there a special 'bonus tax'?
There's no separate, higher tax on bonuses. A bonus is ordinary income taxed at your normal marginal rate. What creates the 'taxed high' feeling is withholding: employers withhold federal tax on bonuses at a flat 22% supplemental rate, and if your actual marginal rate is higher, it feels like a lot was taken — while in fact not enough was, leaving a balance due in April.
Do RSUs get taxed twice?
Not double-taxed, but taxed at two moments. At vesting, the shares' market value is ordinary income, taxed like a bonus. If you then hold the shares and they gain value, that additional gain is taxed separately as a capital gain when you sell. Selling immediately at vesting means only the first (ordinary-income) tax applies, since there's no additional gain.
Will I owe income tax on money I inherit?
Usually not at the federal level for a cash inheritance — it isn't taxable income to you, and any estate tax is paid by the estate before distribution. The important exceptions are inherited pre-tax retirement accounts, where withdrawals are ordinary income to you, and inherited assets that trigger capital gains when you later sell them. A few states also levy inheritance tax.
What is the difference between my marginal and effective tax rate?
Your marginal rate is the rate on your next dollar of income — the top bracket you reach. Your effective rate is your total tax divided by your total income, always lower, because the U.S. system taxes each bracket's income only at that bracket's rate. A windfall is taxed at your marginal rate because it stacks on top of your existing income, but it doesn't push all your income into that bracket.
How do I avoid a big tax bill in April on my windfall?
Estimate the true tax the moment the windfall lands and move that amount into a separate account you won't touch. If the under-withholding is large, consider making a quarterly estimated tax payment to avoid an underpayment penalty, or ask payroll to withhold extra from your remaining paychecks. The goal is to never spend money that was always the IRS's.
Does a windfall push all my income into a higher tax bracket?
No. Because the tax system is marginal, only the dollars that land in a higher bracket are taxed at that higher rate — the rest of your income keeps its original, lower rates. A windfall can push some of its own dollars into a higher bracket since it stacks on your existing earnings, but it never re-rates your entire year's income upward.
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