Gross-Up Calculator
Promise someone an exact after-tax amount? This computes the gross payment that gets there once withholding comes out.
Flat-rate (supplemental) method. Actual net can vary slightly with wage-base caps and local taxes.
What a gross-up is
A gross-up reverses normal payroll math. Instead of “gross $X, see what’s left,” you promise a net amount — “$5,000 in your pocket” — and solve for the gross payment that survives withholding. Employers use it for relocation packages, signing and retention bonuses, severance deals, executive perks and prize payouts, so the tax burden lands on the company instead of the recipient.
Worked example
HR promises a relocating engineer $5,000 after taxes. With 22% federal supplemental withholding, 5% state and 7.65% FICA, payroll must submit a gross payment of $7,651.11 — the company effectively pays $2,651.11 of tax on the employee’s behalf. Note the trap: the tax on the gross-up is itself taxed, which is why the divisor formula (not “net × 1.3465”) is required — the naive multiply would come out $918 short.
Getting the rates right
- Federal: supplemental wages (bonuses, severance, relocation) are commonly withheld at the optional flat 22% rate — mandatory 37% only on supplemental amounts above $1 million in a year. Employers may instead use the aggregate method (W-4 tables), which produces different withholding; the flat-rate method is the norm for gross-ups.
- FICA: 6.2% Social Security + 1.45% Medicare = 7.65%. Above the annual Social Security wage base ($184,500 in 2026), drop to 1.45% (plus the 0.9% additional Medicare above $200,000) — adjust the FICA field for high earners.
- State: use your state’s supplemental rate (zero in the nine no-income-tax states; up to 10%+ in California).
- Withholding ≠ final tax. A gross-up makes the paycheck come out right; the recipient’s true annual tax settles on their return, slightly above or below what was withheld.
Where gross-ups show up
- Relocation: employer reimbursement of moving expenses has counted as taxable wages since 2018, and P.L. 119-21 made that permanent — only active-duty Armed Forces moves under a permanent change of station (and the intelligence community) keep the exclusion. Most corporate relocation packages are therefore grossed up — otherwise a “$10,000 package” quietly shrinks by a third.
- “Net” bonuses and prizes: advertised take-home amounts require the company to eat the withholding.
- Severance negotiations: asking for a grossed-up figure is a legitimate, common negotiating move.
- Imputed income: taxable perks (e.g., domestic-partner health coverage) are sometimes grossed up so employees aren't out of pocket for a benefit.
Frequently asked questions
What does it mean to gross up a payment?
To increase a payment so that after taxes are withheld, the recipient nets an exact promised amount. The employer bears the tax — including the tax on the extra amount itself, which is why the calculation divides by (1 − rate) rather than just adding the tax percentage.
Why is the gross-up more than net + taxes on the net?
Because the additional money you add to cover taxes is itself taxable. Covering $1 of promised net at a 34.65% rate costs about $1.53 gross. The divisor formula accounts for this tax-on-the-tax cascade in one step.
Are gross-ups taxable to the employee?
Yes — the entire grossed-up amount is ordinary wages on the W-2. The point of the gross-up is that the withholding on it was pre-funded by the employer, so the paycheck still lands at the promised net.
What rate should I use for a bonus gross-up?
Start with the federal supplemental flat rate (22%, or 37% for amounts over $1M), add your state’s supplemental rate and 7.65% FICA. That mirrors how payroll will actually withhold on a separate bonus check for most employees.
Official sources
Every rate and threshold on this page comes from the issuing agency. Verify anything here against the primary source:
- IRS Publication 15 (2026), section 7 — Supplemental Wages — the optional flat 22% withholding rate on supplemental wages, and the mandatory 37% on the part above $1,000,000 in a calendar year
- IRS Topic no. 751 — Social Security and Medicare withholding rates — 6.2% Social Security + 1.45% Medicare = the 7.65% FICA default, plus the 0.9% Additional Medicare Tax an employer withholds on wages above $200,000
- SSA — Contribution and benefit base — 2026 Social Security wage base of $184,500 — above it the 6.2% share stops and the FICA field should drop toward 1.45%
- IRS Publication 15-B (2026) — Moving expense reimbursements — P.L. 119-21 permanently eliminates the exclusion for qualified moving expense reimbursements, except for active-duty Armed Forces moves on permanent change of station and for the intelligence community
- California EDD — DE 231PS, Supplemental Wage Payments — the state supplemental rates behind the “up to 10%+” figure: 10.23% on bonuses and stock options, 6.6% on other supplemental wages
Last reviewed: 2026-08-22 · Report an issue