.png)
Your commission isn't taxed at a higher rate than your salary. It's withheld differently. Most employers withhold a flat 22% in federal tax, then take 7.65% for Social Security and Medicare, plus state tax and your 401(k) deferral. Stacked together, that often removes 35-40% of the check.
The IRS treats commissions as supplemental wages, the same category as bonuses and overtime. Under IRS Publication 15, employers can withhold federal income tax on supplemental wages at a flat 22%, rising to 37% only on supplemental pay above $1 million in a calendar year. That flat rate is a prepayment, and your real tax gets settled in April based on your total income for the year.
I carried a quota in tech sales before I became a financial planner, so I know the feeling of opening the deposit from your best month and wondering where a third of it went. Most of the time nothing is wrong. Several different deductions hit the same check at once, and a pay stub doesn't explain which ones are taxes, which are savings, and which you'll get back.
Want someone to walk through your actual pay stub?
One 30-minute call is enough to see whether you're on track for April or headed for a surprise.
Let's TalkWhere Does the Money Go on a $20,000 Commission Check?
About 31.4% goes to taxes and another 6% goes to your own 401(k). Suppose you're a single account executive in Pennsylvania with a $90,000 base, your employer uses the flat 22% method, and you defer 6% into your 401(k). A $20,000 commission check breaks down like this:
| Line on your stub | Rate | Amount |
|---|---|---|
| Gross commission | $20,000 | |
| Federal income tax withholding | 22% of $18,800 | -$4,136 |
| Social Security | 6.2% | -$1,240 |
| Medicare | 1.45% | -$290 |
| Pennsylvania income tax | 3.07% | -$614 |
| 401(k) deferral | 6% | -$1,200 |
| Take-home | 62.6% | $12,520 |
That's $7,480 gone, or 37.4% of the check. Federal income tax is $4,136 of it: 22% of the $18,800 left after your 401(k) deferral, since pre-tax deferrals come out before federal withholding is figured. The $1,200 in your 401(k) is still your money. Pennsylvania is one of the few states that taxes 401(k) contributions, which is why its 3.07% applies to the full $20,000. Many Pennsylvania towns also take a local earned income tax, so your stub may show one more line than this.
Social Security and Medicare together are called FICA, and they come out at the same 7.65% whether you're in the 12% bracket or the 35% bracket. Reps who add FICA to federal withholding and call the total their "tax rate" overstate their income tax rate by nearly eight points.
Is Commission Taxed Higher Than Salary?
No. Commission and salary are both ordinary income and fall into the same federal tax brackets. For a single filer in 2026, the 22% bracket runs up to $105,700 of taxable income, the 24% bracket up to $201,775, and the 32% bracket up to $256,225, after a $16,100 standard deduction.
Withholding is the part that differs. Your salary gets withheld based on your W-4, spread evenly across the year. Commission gets withheld at whatever rate the supplemental method produces, which may be well above or well below your actual bracket. When you file, the IRS adds everything up, runs it through the brackets once, and compares the result to what you already paid in.
Why Was My Commission Check Withheld at 40% or More?
Your employer is probably using the aggregate method. Publication 15 gives employers two options for supplemental wages, and the second one adds your commission to your regular pay for that period and withholds on the total as if you earned that amount every paycheck.
Take the same rep with a $90,000 base paid every two weeks. A normal check is about $3,462. Add a $20,000 commission and that period's pay becomes $23,462, which payroll treats as if you were earning roughly $610,000 a year. The top of that check gets withheld at the 35% bracket rate, and once FICA and state tax stack on top, the stub can show 45% or more coming out.
You don't lose that money. Withholding above what you actually owe comes back as a refund when you file, but it sits with the IRS interest-free until then, and a lot of reps budget around the smaller deposit without realizing part of it is coming back.
If your employer uses the aggregate method, part of each big check is an interest-free loan to the IRS. Run the IRS estimator after your largest check each quarter so you know roughly what's coming back instead of guessing.
Why Did My Commission Checks Get Bigger Late in the Year?
You probably passed the Social Security wage base. In 2026, the 6.2% Social Security tax only applies to the first $184,500 of wages, so once your year-to-date pay crosses that line, it stops coming out. On a $20,000 check, that's $1,240 more in your deposit.
Medicare moves the other way. Once your wages with one employer pass $200,000, payroll adds the 0.9% Additional Medicare Tax, so the 1.45% line becomes 2.35%.
Both counters reset on January 1. A rep who crushed Q4 and hits the wage base by October sees fatter checks through December, then watches the January check shrink even though nothing about the comp plan changed. If your spending adjusts to the December deposit, January feels like a pay cut, which is one more reason to build your budget around a commission income floor instead of your latest check.
Will I Get Money Back or Owe More in April?
It depends on your bracket and your employer's method. With the flat 22% method, every commission dollar that lands in a bracket above 22% is under-withheld by the difference: 2 points in the 24% bracket, 10 points in the 32% bracket, 13 points in the 35% bracket. With the aggregate method, most reps get money back.
Two hypothetical single reps, both on the flat method, show how fast the gap grows:
| Rep A | Rep B | |
|---|---|---|
| Base salary | $90,000 | $150,000 |
| Commission for the year | $80,000 | $150,000 |
| Top federal bracket reached | 24% | 35% |
| Federal under-withholding on commission | About $960 | About $10,400 |
| Extra 10% reserve set aside | $8,000 | $15,000 |
Rep A barely has a problem. Rep B owes the IRS about $10,400 in April if nothing changes, and that's before any state tax gap, equity comp, or investment income. In both cases the 10% reserve covers it with room left over. Rep B's income runs through the 24%, 32% and 35% brackets, and the gap averages out to about 7 points across all $150,000 of commission.
When a commission check lands, move an extra 10% of the gross into your high-yield savings account and tag it as your tax reserve. Your employer already withheld 22%, so the extra 10% covers the gap to the 32% bracket for most reps, plus a buffer for state tax. After you file, whatever's left goes back into your plan.
If you're in a high-tax state, sell equity during the year, or earn well past $300,000, run the numbers instead of relying on the rule of thumb. The full walkthrough is in how much to set aside for taxes on commission income, including how to change your W-4 and when the IRS safe harbor rules protect you from underpayment penalties.
Not sure if Rep A or Rep B looks more like you?
Bring your last pay stub to a free call and we'll figure out your real number for April.
Book a callHow Do I Check Which Withholding Method My Employer Uses?
Divide the federal withholding on a commission check by the gross commission. If it comes out to exactly 22%, your employer uses the flat method. Anything noticeably higher means the aggregate method. From there:
- Find a pay stub where the commission is its own check or its own line item.
- Divide the federal income tax withheld by the commission amount.
- Note whether your year-to-date wages are past $184,500 (Social Security stops) or $200,000 (Additional Medicare starts).
- Plug your year-to-date numbers into the IRS Tax Withholding Estimator, which takes about 10 minutes.
- If it shows you'll owe, either raise your 10% reserve or add a flat dollar amount per paycheck on Step 4(c) of your W-4.
Do this once after your biggest check of each quarter. It takes less time than a pipeline review, and it's the difference between knowing your April number in September and finding out in March.
Frequently Asked Questions
Why is my commission taxed so much?
It usually isn't taxed more; it's withheld all at once. Federal withholding at a flat 22%, 7.65% for Social Security and Medicare, state tax, and your 401(k) deferral all come out of the same check, which can remove 35-40% of it. Your actual tax is calculated on your total income when you file.
Is commission taxed at 22% or 40%?
Neither is your tax rate. The 22% is the IRS flat withholding rate for supplemental wages, and 40% is what you see when FICA, state tax and retirement contributions stack on top of it. What you actually owe depends on which federal brackets your total income reaches.
Is commission taxed higher than salary?
No. Commission and salary are both ordinary income taxed at the same federal brackets. Only the withholding method differs, which is why a commission check can look heavily taxed while your regular paycheck doesn't.
Why was my commission withheld at a higher rate than my regular paycheck?
Your employer is likely using the aggregate method, which adds the commission to your regular pay and withholds as if you earned that total every pay period. That pushes the top of the check into a high bracket for withholding purposes. You get any excess back when you file.
Do I get my commission tax back?
You get back anything withheld above what you actually owe for the year. Reps on the aggregate method often get a refund; reps on the flat 22% method whose income reaches the 24% bracket or higher usually owe more. The IRS Tax Withholding Estimator shows which way you're heading.
When does Social Security stop coming out of my paycheck?
In 2026, Social Security tax stops once your wages from one employer pass $184,500. The 6.2% deduction drops off for the rest of the year and restarts on January 1. If you change jobs mid-year, the new employer starts withholding again, and you claim the overpayment on your tax return.
How much of my commission should I save for taxes?
Set aside an extra 10% of every commission check on top of what your employer already withholds. For most reps, that covers the gap between 22% withholding and their actual bracket up through the 32% bracket, with a buffer for state tax.
