The Alabama bonus tax calculator at the top of this page uses the supplemental tax rate so employers can easily figure out the net pay (or take-home pay) your employee should take home for wage payments such as bonus pay.
Behind the numbers
Behind the numbers
Updated: July 8, 2025
Does Alabama tax bonuses?
Yes. Alabama taxes bonuses as supplemental wages. If paid with regular wages, they’re taxed as one lump sum. If paid separately, employers can aggregate them or use a flat 5% supplemental withholding rate (the calculator on this page can help you do this in a couple of clicks).
How to calculate bonus tax in Alabama
Employers can either combine bonuses with regular wages and use the standard withholding tables, or use the flat 5% supplemental rate for separate bonus payments. Don’t forget to include federal withholding at 22%.
What is the bonus tax rate in Alabama?
The flat supplemental withholding rate is 5% for the state, plus 22% federal tax.
How can employers in Alabama pay bonuses to employees?
Bonuses in Alabama can be paid via:
- Check
- Direct deposit
- Pay card
How do bonuses work in Alabama?
Employers can issue bonuses as lump sums or alongside regular pay. How it’s taxed depends on timing and whether the amounts are itemized. Bonuses paid with vacation or incentive pay may also be subject to supplemental wage rules.
Why are bonuses taxed differently than standard pay?
Bonuses are considered “supplemental wages” by both state and federal tax authorities, which means they may be taxed at a flat rate rather than through normal withholding brackets.
How much tax is taken out of a bonus in Alabama?
Bonuses may be taxed at 27% total — 22% federal and 5% state — if the flat rates are used.