How do bonuses affect my income tax return?

SGT Private RallyPoint Member — Wed, 03 Oct 2018 16:59:20 -0400

I recently re-enlisted for a fairly large bonus. I have a slight idea of how bonuses work, but I don’t know how they effect my income tax return for next year. Here are my questions:

1) Is the 25% taken off the top shown in the federal tax section of my LES?

2) Is the untaxed bonus amount added to my gross income for this year? Or is the taxes amount added?

3) Obviously it depends on a lot of factors, but how much of the taxed amount can I expect to receive back?

4) I’m fairly confident this bonus will push me into the next higher tax bracket, but how will this generally effect my overall return?

Response by LTC Stephan Porter made Oct 3 at 2018 5:08 PM

LTC Stephan Porter — Wed, 03 Oct 2018 17:08:05 -0400

Yes, all gross pay is taxable.

Response by Norah Julmis made Oct 3 at 2018 5:16 PM

Norah Julmis — Wed, 03 Oct 2018 17:16:40 -0400

If I recall, ours was taxed before it came to us, but it also bumped us into a new tax bracket and we had to pay more taxes because of it.

Response by MAJ Ken Landgren made Oct 3 at 2018 5:19 PM

MAJ Ken Landgren — Wed, 03 Oct 2018 17:19:24 -0400

Response by CW3 Michael Bodnar made Oct 3 at 2018 8:34 PM

CW3 Michael Bodnar — Wed, 03 Oct 2018 20:34:23 -0400

Great question. First of all, are you going to be deployed in the near future or are you currently deployed? If you are deployed, you will get your bonus tax free depending on where you are in the world.

To answer your questions, yes you will get taxed at a very high rate for the bonus money. You will likely get a separate LES from your regular one and it will break out the taxes and everything on that LES. I believe the current rate is above 25% but you'd have to refer to the IRS rules. Second, the entire amount is considered gross income if you don't have any money going towards a 401k or some other retirement plan. You will see the information laid on your W2 at the end of that tax year. Third, depending on multiple factors, you might get money back and you might not. Fourth, it truly depends on those factors I just mentioned and what your total income looks like.

It's best to hit up the H&R block folks on base during tax time. Bring everything with you (W2's, receipts, 1099's, 1098's etc) where applicable. Of course, if you have questions, they're available throughout the year to help you assess your tax situation.

Hope that helps you out.

Response by SFC Private RallyPoint Member made Oct 4 at 2018 2:52 AM

SFC Private RallyPoint Member — Thu, 04 Oct 2018 02:52:10 -0400

This is the way I explain it when someone reenlists:
1. 22% is taken immediately for federal taxes (recent change from the 25% previously). Your state may take additional taxes.
2. Your bonus money counts as income and is rolled into your total gross income, and the taxed portion is rolled into your taxes paid. Bonuses, unlike BAH, don't have any special tax exemption.
3. You will receive the portion back that was overly taxed.
4. It will probably move you to a higher tax bracket, however definitely not 22%, so you've probably overpaid your yearly taxes with your bonus tax. So you should get money back if it was big enough.

Response by Lt Col Charlie Brown made Oct 4 at 2018 9:18 AM

Lt Col Charlie Brown — Thu, 04 Oct 2018 09:18:01 -0400

Taxable. Get some advice before filing

Response by MAJ Ken Landgren made Oct 4 at 2018 2:51 PM

MAJ Ken Landgren — Thu, 04 Oct 2018 14:51:18 -0400

You will owe a butt load of taxes.

Response by Stephen Reilly made Jan 15 at 2023 7:06 AM

Stephen Reilly — Sun, 15 Jan 2023 07:06:47 -0500

Hello. Hope you've solved that issue and there have not been any serious changes or updates since then. It's understandable that you're unsure of how your bonus will affect your income tax return. To get a better idea of your gross income, taxes, and deductions, you can use a paystub generator. Check out https://www.paystubcreator.net/ . It's a helpful tool that can give you a clearer picture of your finances. Let me know if you have any other questions. I'll be waiting for your reply.

Paystub Generator | Paystub Creator - PayStubCreator

The ultimate check stub maker. It takes a few minutes to fill, download and print. Generate your paystubs online. Try it now!