All around the world, December is the month when everyone exchanges or gives gifts to others. Some employers also give end of year bonuses to their employees as a reward for their services the entire year. You might have already started to think about what are you going to do with the money that you will be getting. However, before you spend the entire money that you get from your employer, you have to think that the holiday bonus which you have gotten can be compensated just like paychecks. So, you should keep in mind that you will have to pay taxes from the holiday bonus that you get.
What kind of taxes will you exactly have to pay from your holiday bonus is what we will be mentioning below.
You will have to pay the medicare tax on your entire compensation so 1.45 percentage of it will be deducted for the medicare tax.
Almost 85 percent of the social security income is taxable and that can be quite hard for you specially when the federal income tax will come. It all depends upon how much tax is applied on your social security income as much as you are earning it.
However, with some planning, learning and some preparation you can lessen and decrease your tax liability. These include some steps for example properly balancing and rebalancing your portfolio. Apart from that, it also includes to structure many kinds of transactions which one makes.
It is the requirement of the IRS to pay a 25 percent of tax from the income tax that should be paid from the bonuses. There is an open option for the employer to give your bonus with paycheck and then hold the taxes on the entire amount which will increase the tax payable.
Almost majority of the states impose the income tax and so the state income tax will be withheld by the rate which is imposed by the state law.
If you have a contributory retirement plan or you have already asked your employer to withhold some percentage of your wages so some of the percentage will then be deducted from your holiday bonus tax. If you have earlier made a request about 15 or 20 percent of your wages to go to retirement then that 15 or 20 percentage might also be deducted from your bonus.
Although this will be quite hard for you at the moment as you will have to compromise on your wallet at the moment but then later onwards this will be like a big benefit for you. If you add them all together you will figure out the amount which is being withheld, but the good side will be this that you will get a bonus and get a bit of it back to yourself when you will pay your taxes.
Non-cash holiday bonuses
Have you thought about the non-cash holiday bonuses such as Thanksgiving or Christmas baskets and gifts? These are better known as non-cash fringe benefits. If the gift is of that sort that it can be converted back to cash such as a gift store card it is known as a taxable benefit.
Enjoy your holiday bonuses and make sure that you take out some time from your busy schedule and plan how to spend a nice holiday vacation. Think about the best way to make use of your holiday bonus tax and where are you going to spend it.
Think about maximizing your tax and saving up all the benefits. However, be relaxed and you can of course think about spending a good amount of your holiday bonus somewhere you have been wanting to visit or buying something which seemed impossible in the past.
Even though, your entire holiday bonus might eventually finish but nevertheless, it should be something which you do not regret in your later years. It should be something which makes you feel extremely good about it and makes you relaxed. You can then return back to your work after having spent a good holiday and then wait for the next year to get your holiday bonus!
Valderas Financial Solutions LLC