Does A Christmas Bonus Have To Be Taxed?

Nothing is more inspiring and heartwarming than working in a place where the workers enjoy top-tier priority. This privilege includes getting a Christmas holiday bonus which comes in the form of cash or kind from an excellent workplace. The question on the average people’s mind as regards holiday bonus is that does it come taxed as their salaries. Anyone with that question should read on. Let us know ‘Does A Christmas Bonus Have To Be Taxed?’

Does A Christmas Bonus Have To Be Taxed?

Does A Christmas Bonus Have To Be Taxed?

Yes, it has to be taxed. Holiday bonuses are subject to state, FICA, and federal income tax. This is not an exception to Christmas holiday bonuses. The tax rates of federal, FICA, and state differ. Above all, the bonus is subject to the percentage of those taxes before workers can access them.

More Detailed Information As Regards Taxes On Christmas Bonuses:

Although the federal government taxes bonuses, the same way they tax salaries. Here’s the good news; there’s a huge difference between the number of taxes workers have to pay for bonus taxes and salary taxes. 

Also, unlike salaries, bonuses mean supplemental wages. This means that they’re subjected to a 22% mandatory flat withholding rate. That’s if the business or company gets a yearly payroll of $1million+. 

As regards FICA, the Federal Insurance Contribution Act. This is a law that requires a salary tax contribution. The law uses taxes to cater to the social, security and Medicare of the general public. 

Workers and employers alike can be free from this tax if they hit a certain amount of yearly earnings. They’ll need to earn $127,000 before they can become exempt from the FICA taxes. 

Alternatively, businesses and companies can reduce taxes imposed on them. Employees can cooperate with their workers when they combine their salaries with their bonuses. 

This may lead to higher withholding. Which in turn means it becomes less stressful for workers to get a separate bonus check. 

Importance Of Giving Out Christmas Bonuses:

There’s no better way to touch the heart of one’s workers than to give them bonuses. Plus, several work privileges now and then. Although these bonuses come taxed, workers still appreciate the little they can get from those bonuses. 

In the end, it’s not all about the money or the kind given as bonuses. It’s all about the thoughts behind those bonuses which were passed to the workers. Other benefits of giving out bonuses include;

Higher Productivity & Engagements:

When people work in an environment where they know that the harder and more efficiently they work. The higher bonuses and privileges they’ll enjoy. 

These workers know that if they have to work hard today. They can ask for and get to enjoy breaks and several privileges tomorrow.

Therefore they’ll do the work with all of their being and energy. Additionally, incorporating certain bonuses and privileges to certain goals. Plus, the performance makes the workers more than willing to get the job done. 

 A Boast of Work Happiness:

The number one way to make the working place a happy and less-tense environment is to make available bonuses. Christmas holiday bonuses and random bonuses alike. 

This helps instill in the heart of workers that their employers care about them and that they’re proud of them. An employer will only be happy to give out bonuses when he or she is pleased with the work of the workers. 

Therefore, the surest way to make employees understand that they’re doing a good job. And that their employers are happy with their work by granting them bonuses and tips.

Several Ways Employers Can Gift Out Christmas Bonuses:

Giving out cash incorporated into one’s paycheck isn’t the only way to gift Christmas bonuses to employees. Other ways are;

  • Certificates of good conduct.
  • Physical gift cards.
  • Kinds such as provision stuff.
  • Stand-alone checks.

The reality remains that all of these other forms of providing Christmas bonuses to employees are subjected to taxes by the IRS. Employees and employers alike wanting to know how taxes work can either consult their payroll specialist or accountant for more information. These two people are in a better position to notify the employee and employers how the taxes work. 


This article has proven beyond all reasonable doubt that bonuses, especially Christmas bonuses, come taxed. It’s left for workers to know and calculate the tax rates removed from their Christmas holiday bonus. This will help them know how much they’ll go home with at the end.

Frequently Asked Questions:

  • How much is the expected Christmas holiday bonus?

Employers give out Christmas holiday bonuses based on a % of the workers’ yearly earnings. This means they give out 5-10% of workers’ total yearly earnings. 

  • When should workers expect their Christmas bonus?

Employers pay year-end bonuses such as Christmas holiday bonuses within the first few months of the new year. Therefore workers shouldn’t expect their Christmas bonus before the end of the year but after.

  • Is it possible to give out bonuses bypassing taxes?

An employer can’t give out bonuses to workers by bypassing taxes. Workers can only request non-financial bonuses, that’s the only way they can reduce the taxes to zero.

Does A Christmas Bonus Have To Be Taxed?

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