Americans may find their year-end bonuses significantly reduced due to tax withholding rules. Bonuses are treated as supplemental income, subject to a flat 22% federal withholding rate for amounts under $1 million, plus Social Security and Medicare taxes. This can result in a total withholding of 30-35%, which may be higher than an individual's regular tax bracket. The immediate deduction can lead to financial strain, especially if individuals spend based on the gross bonus amount.