The tax rate on commission income is your ordinary federal income tax rate, the same progressive rate that applies to salary and hourly wages. There is no separate commission tax rate in the tax code. The 22% (or higher) figure that shows up on a commission paycheck is a withholding rate the IRS requires employers to apply to supplemental wages, not a verdict on what you owe. Your real rate is settled when you file, based on your total taxable income for the year.
The Rate You Actually Pay
Commissions get added to your salary, bonuses, interest, and every other source of taxable income to produce a single total. That total moves through the federal bracket system, where each slice of income is taxed at a progressively higher rate.1Internal Revenue Service. Federal Income Tax Rates and Brackets
For 2026, the federal brackets for single filers are:2Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
- 10% on income up to $12,400
- 12% from $12,401 to $50,400
- 22% from $50,401 to $105,700
- 24% from $105,701 to $201,775
- 32% from $201,776 to $256,225
- 35% from $256,226 to $640,600
- 37% over $640,600
Married couples filing jointly get roughly double those thresholds at each level. The rates were originally set by the Tax Cuts and Jobs Act and made permanent by the One Big Beautiful Bill Act signed in 2025.2Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
Because the brackets are progressive, only the dollars inside a given bracket are taxed at that bracket’s rate. A single filer with $90,000 of total income pays 10% on the first $12,400, 12% on the chunk after that, and 22% only on the portion above $50,400. The blended rate across all those slices is your effective tax rate, and it’s always lower than the highest bracket you touch. That’s the number worth knowing. The withholding on a commission check often looks like a flat percentage applied to every dollar, which is what creates the impression of a higher rate than you’ll actually owe.
Why Your Commission Paycheck Looks Overtaxed
The IRS treats commissions as supplemental wages because they’re paid on top of regular salary or hourly pay.3eCFR. 26 CFR 31.3402(g)-1 – Supplemental Wage Payments That classification triggers a different set of withholding rules, and employers can pick from two methods.
Flat 22% Method
The common approach is a flat 22% federal withholding on the commission. If your employer pays the commission separately from your regular paycheck and has already withheld income tax from your wages during the year, they can simply take 22% off the top of the commission. Your W-4 elections don’t change it.4Internal Revenue Service. Publication 15-A (2026), Employer’s Supplemental Tax Guide
If your total supplemental wages exceed $1 million during the calendar year, withholding on every dollar above that threshold jumps to 37%, and the employer must apply that rate regardless of anything on your W-4.4Internal Revenue Service. Publication 15-A (2026), Employer’s Supplemental Tax Guide
Aggregate Method
The other option is the aggregate method. The employer combines the commission with your regular pay for the period, runs withholding as if that inflated amount were a normal paycheck, and the payroll system annualizes the total, temporarily pushing it into higher brackets. Employers must use this method when the commission isn’t paid separately from regular wages.4Internal Revenue Service. Publication 15-A (2026), Employer’s Supplemental Tax Guide
Either way, withholding is just an advance payment against your annual tax bill. If 22% comes out of your commission but your effective rate ends up at 16%, the difference comes back as a refund. If your effective rate is higher than 22%, you’ll owe the balance when you file. The withholding rate is a collection mechanism, not the tax.
Payroll Taxes on Top of Income Tax
Income tax isn’t the only federal levy on commission income. W-2 commissions are also subject to FICA payroll taxes for Social Security and Medicare. The employee’s share is 7.65%, split into 6.2% for Social Security and 1.45% for Medicare, and the employer matches it.5Internal Revenue Service. Topic No. 751, Social Security and Medicare Withholding Rates
The 6.2% Social Security portion stops applying once your total wages for the year reach the Social Security wage base. For 2026, that cap is $184,500.6Social Security Administration. What Is the Current Maximum Amount of Taxable Earnings for Social Security The 1.45% Medicare portion has no cap.
An additional 0.9% Medicare surtax applies once your wages exceed $200,000 for single filers, $250,000 for married filing jointly, or $125,000 for married filing separately. This one is the employee’s responsibility alone, and employers start withholding it automatically once your pay for the year crosses $200,000, regardless of your filing status.7Internal Revenue Service. Topic No. 560, Additional Medicare Tax
How the Rate Differs for 1099 Commission Earners
If you earn commissions as an independent contractor, the income tax brackets above still apply the same way. Two things change the total rate you pay.
First, no one withholds anything. You receive the full gross commission and handle the tax yourself, generally through quarterly estimated payments filed on Form 1040-ES, due April 15, June 15, September 15, and January 15 for the prior quarter.8Internal Revenue Service. Individuals – Estimated Tax
Second, you owe self-employment tax instead of FICA, and you owe both halves. The combined rate is 15.3%, made up of 12.4% for Social Security and 2.9% for Medicare.9Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes) The rate applies to 92.35% of your net self-employment earnings rather than the full amount, mirroring the tax benefit W-2 employees get from the employer paying half of FICA. The same $184,500 Social Security wage base applies, and the 0.9% Additional Medicare Tax kicks in at the same thresholds as W-2 wages.7Internal Revenue Service. Topic No. 560, Additional Medicare Tax Half of the self-employment tax is deductible as an adjustment to income on your Form 1040, which reduces the income tax portion but not the self-employment tax itself.
Two features cut the 1099 rate back down. On Schedule C, you subtract ordinary and necessary business expenses (mileage, home office, insurance, supplies, professional development) before any tax is calculated, and every dollar of legitimate expense reduces both your income tax and your self-employment tax.10Internal Revenue Service. Instructions for Schedule C (Form 1040) On top of that, the Section 199A qualified business income deduction lets eligible self-employed individuals deduct up to 20% of net business income; it was made permanent by the One Big Beautiful Bill Act in 2025.2Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 The full deduction is available to single filers with taxable income below roughly $201,750 and joint filers below about $403,500, then phases out over the next $75,000 (single) or $150,000 (joint), with additional limits for certain service businesses inside the phase-out range. The QBI deduction doesn’t reduce self-employment tax, but it lowers the income tax portion meaningfully. W-2 employees can’t claim it on their wages.
W-2 commission employees, for their part, lost the ability to deduct unreimbursed business expenses after 2017. The route to tax-free treatment now runs through an employer’s accountable plan: if the plan requires you to substantiate expenses and return any excess, reimbursements are excluded from your wages entirely and don’t appear on your W-2. Reimbursements under a non-accountable plan are treated as taxable income.
Where the True Rate Shows Up
For W-2 employees, commissions appear in Box 1 of your W-2 alongside your regular wages. Every dollar withheld across the year, including the 22% flat-rate amounts or inflated aggregate withholdings from commission checks, shows up in Box 2. Your actual tax liability is calculated on Form 1040 based on total taxable income after deductions and credits, and the Box 2 total is credited against it. Excess withholding comes back as a refund; a shortfall is due with the return.
For 1099 contractors, the payer reports gross commissions on Form 1099-NEC.11Internal Revenue Service. Reporting Payments to Independent Contractors Income moves to Schedule C, expenses come off, and the net profit flows to Form 1040 for income tax and to Schedule SE for self-employment tax. Quarterly estimated payments are credited against the combined liability.
State tax is a separate layer worth checking before you plan around any of this. Most states tax commission income as ordinary income, and many apply their own supplemental withholding rate on commission payments, typically somewhere between 5% and 12%. A handful of states have no income tax at all. Look up your state’s rules early in the year so your withholding or estimated payments cover both federal and state obligations.