Find the gross amount needed so someone nets a target take-home after taxes — the math behind grossing up a bonus or reimbursement.
Gross-up = net ÷ (1 − total tax rate). Use the supplemental federal rate (often 22%) plus state and FICA for bonuses. This is a flat-rate estimate; actual withholding can differ with wage bases (Social Security cap) and bracket effects. Not tax advice.
When you promise someone a specific take-home — a $1,000 bonus, a relocation reimbursement — you must pay more than that so the amount survives withholding. Grossing up divides the target net by one minus the total tax rate, so the after-tax result lands exactly on target.
Gross = net ÷ (1 − total tax rate)
When you promise someone a specific amount in their hand — a $1,000 bonus, a relocation payment, a taxable reimbursement — the promise is about the net, but payroll withholds from the gross. Grossing up finds the gross that survives withholding and lands exactly on the promised net. The formula is gross = net ÷ (1 − total rate), and the reason it is a division rather than an addition is that the tax is charged on the larger figure you end up paying, not on the smaller figure you promised.
What the calculation ignores is everything that makes real withholding non-flat. It treats income tax and FICA as one flat percentage of the payment. Real payroll has a Social Security wage base above which that portion of FICA stops, an Additional Medicare surtax that starts partway up, state and local rules that vary enormously, and bracket effects when a bonus is added to regular wages. This is a flat-rate estimate for setting a payment, not a substitute for your payroll system's own calculation.
Target net $1,000, income tax 22%, FICA 7.65%. Total rate is 0.22 + 0.0765 = 29.65%, so the retained fraction is 1 − 0.2965 = 0.7035. The gross is $1,000 ÷ 0.7035 = $1,421.46. Withholding takes $1,421.46 − $1,000 = $421.46, and the check back confirms it: $1,421.46 × 0.7035 = $1,000.00 exactly.
Now the mistake that makes this page worth reading. Add 29.65% to the $1,000 instead of dividing and you pay $1,296.50. Withholding takes 29.65% of that, leaving $912.09 — $87.91 short of the promise, or 8.8% under, on a single payment. The error compounds with the rate: at 22% federal, 5% state and 7.65% FICA the total is 34.65% and the correct gross for the same $1,000 net is $1,530.22, so a five-point state tax adds over a hundred dollars to what you must pay out.
For a bonus, the usual starting point is the IRS supplemental wage rate — commonly 22% federal on supplemental payments under $1 million — plus your state rate and 7.65% FICA. That is a convention, not a guarantee: the supplemental method is one of two the IRS permits, high earners are treated differently, and a handful of states have their own supplemental rates. Check the current year's figures before you commit to a number in writing.
The cost most employers forget to budget is the other half of FICA. On the $1,421.46 gross above, the employer also owes its own 7.65% — $108.74 — so the true cost of putting $1,000 in someone's hand is about $1,530, not $1,421. And a gross-up is not always the right instrument: if the goal is simply to pay someone more, raising the gross and letting the net fall where it falls is simpler and cheaper. Gross up when the net is the promise — a relocation cost you agreed to cover, a referral fee quoted as cash in hand.
One bonus is one division. A year of bonuses, reimbursements and contractor payments — each with its own gross, withholding and employer-side cost, all of which have to reconcile at year end — is a payroll record. Our small business bookkeeping template keeps those payments and their tax lines in one dashboard rather than scattered across approval emails. For the employee's side of the same payment, the take-home pay calculator works forwards from gross to net, and the paycheck calculator handles the regular cheque it sits alongside.
The IRS supplemental wage rate is commonly 22% federal, plus your state rate and 7.65% FICA. High earners may hit different rates — this is a flat-rate estimate.
Yes — for signing bonuses, relocation, and taxable reimbursements where the employer wants the employee to receive a clean, promised amount.
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