Commission Tax Calculator

How Commissions Are Taxed in 2026

The IRS classifies sales commissions as supplemental wages (Publication 15, Section 7). That puts them in the same category as bonuses, overtime, severance, and retroactive pay. Your employer has two ways to withhold federal income tax on a commission: the flat percentage method or the aggregate method. Either way, Social Security (6.2% up to the $184,500 wage base), Medicare (1.45% on every dollar), and any state tax come out before you see a cent.

One important thing to understand: withholding is not the same as your final tax bill. Commissions count as ordinary income on your Form 1040, taxed at your marginal bracket. If more was withheld than you actually owe, you get the difference back as a refund. If less was withheld, you may owe more in April. The Tax Cuts and Jobs Act brackets (10%, 12%, 22%, 24%, 32%, 35%, 37%) were made permanent by P.L. 119-21, so the seven-rate structure applies for 2026.

Flat 22% vs. aggregate: which leaves more in your pocket?

The flat rate method withholds a straight 22% for federal income tax on the first $1 million of supplemental wages in a year. Anything above $1 million gets withheld at the mandatory 37% rate under 26 CFR §31.3402(g)-1. There's one catch. The flat method is only available when the commission is paid on a separate check, or clearly identified as a separate line item on a combined paycheck. If it just gets dropped into your regular pay with no distinction, your employer has to use the aggregate method.

The aggregate method (IRS Publication 15-T, Worksheet 1A) combines your commission with one regular pay period, annualizes the total, runs it through the 2026 withholding tables for your filing status, then subtracts what would have been withheld on your salary alone. The leftover is what comes out of the commission. This method tracks your actual marginal rate more closely, which is why it tends to withhold less for high earners already in the 24%+ bracket and more for workers in the 10% or 12% bracket.

Short version: if your salary puts you in the 22% bracket, both methods land in roughly the same place. If you're below 22% (under about $48,475 single in 2026), flat 22% likely over-withholds. If you're above 22%, aggregate usually over-withholds more than flat 22% does. Your employer picks the method, but knowing how both work lets you estimate what you'll pocket.

Worked example: $10,000 commission on $75,000 salary (single, TX, biweekly)

Flat 22% method: Federal $2,200 + Social Security $620 + Medicare $145 + State $0 = $2,965 withheld, $7,035 net (effective rate 29.65%).

Aggregate method on biweekly pay: a $75,000 salary already sits firmly inside the 22% bracket, so the incremental federal withholding on $85,000 of annualized income is also near $2,200. Net commission works out to about $7,035, within a few dollars of the flat result. At a $45,000 salary (12% bracket), flat would withhold about $1,000 more than aggregate. At a $250,000 salary (24%+), aggregate can withhold $300 to $500 more than flat.

Commission Tax Reference Table

Federal withholding at the flat 22% rate plus FICA (7.65%) for a no-income-tax state like Texas. Assumes year-to-date wages are below the Social Security wage base and below the $200K Additional Medicare threshold. For state tax, add the supplemental rate for your state (e.g., California 10.23%, New York 11.70%).

A few things that shift these numbers. If your year-to-date wages plus the commission push you past $184,500, Social Security stops on the portion above the cap. If they pass $200,000 at a single employer, an extra 0.9% Additional Medicare Tax kicks in. And if cumulative supplemental wages cross $1 million in a year, the excess is withheld at 37% instead of 22%.

State-level considerations

Nine states have no income tax at all: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. If you live in one, no state withholding applies to your commission.

About half the remaining states publish a flat supplemental withholding rate used specifically on bonuses and commissions. California's is 10.23% (the highest for commissions specifically), New York's is 11.70%, Minnesota's is 6.25%, and Oregon's is 8.00%. In those states, your commission gets multiplied by the supplemental rate for state withholding.

The rest of the income-tax states don't publish a supplemental rate. Your employer falls back to the regular withholding tables, which usually means the aggregate method for state tax as well: your state income on the annualized combined amount, minus the state tax on your salary alone, scaled back to one period.

Making your withholding match your actual tax bill

1. Use Form W-4 line 4(c) to request extra federal withholding. Helpful if your commissions are large and you're in a higher bracket than 22%.
2. Max out pre-tax deductions. Every dollar you add to your 401(k) or HSA reduces your taxable income, which reduces your tax liability on commission income too.
3. Time big commissions carefully. A late-year commission may dodge Social Security tax if your year-to-date wages have already crossed $184,500.
4. Quarterly estimated payments are the right move for 1099 commission earners (real estate agents, independent reps). This W-2 calculator doesn't cover them, so use Form 1040-ES instead.
5. A quick chat with a tax professional is worth it when commissions are a big chunk of your income. A couple hundred dollars in advice can save thousands at tax time.

Need a full paycheck breakdown with all deductions? Try our Hourly Paycheck Calculator. Looking at the FICA slice specifically? See our FICA Tax Calculator. Curious how a base pay bump plus commission change stacks up? The Pay Raise Calculator can help.