I work in a profession where my bonus is a small set amount and isn’t guaranteed (you have to qualify for it). I really look forward to earning the bonus and have to work pretty hard to get it. So why are bonuses taxed when I already have my regular salary chopped up? It’s pretty disheartening to see this small amount reduced after earning it.
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It is even worse, your bonus gets taxed by your highest tax bracket and may even get into a higher tax bracket then your normal salary. Meanwhile a lot of your normal salary is in the lowest tax bracket and may not even be taxed at all.
The issue is that it is impossible to differentiate between normal salary and bonus salary. You may have a modest bonus which requires a lot of extra effort to reach but a lot of people may depend on their bonus. For example it is typical in sales and a few other positions that half the salary is expected to be bonuses based on your performance. It is not a nice little extra for when you work harder but an expected reward for the work you do. And it will therefore have to be taxed accordingly. And some upper management might get almost all their salaries as bonus based on the company performance and it would be pretty bad if they did not get taxed.
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