The tax rate on bonuses that are under $1 million is a flat 22% for federal taxes. However, it's important to remember that state taxes may also apply. For instance, in California, employees pay an additional 10.23% on bonuses, which comes to a combined 32.23% to 47.23% tax rate for federal and state, depending on the size of the bonus.
While the tax implications of a bonus can be significant, there are strategies to minimize your tax bill. One such strategy is charitable giving. A donor-advised fund (DAF) like Daffy can be a great option to lower your taxable income while also supporting the causes you care about.
With Daffy, you can invest the money in your chosen portfolio until you're ready to make a donation. This not only allows you to give back but also helps you manage your tax obligations more effectively.
Moreover, if you're one of the estimated 30% of taxpayers who itemize their deductions, you can deduct charitable contributions up to 60% of your adjusted gross income. This makes Daffy an even more attractive option for managing your bonus and its tax implications.
So, if you've received a big bonus and are concerned about the tax implications, consider Daffy. It's a great way to pay less in taxes, give back to the community, and make the most of your bonus.