How Illinois withholds on a bonus
Illinois has no separate supplemental rate because its income tax is a flat 4.95% on nearly every dollar, with only a $2,925 exemption per person and no standard deduction. A bonus is withheld at 4.95% whether paid separately or with regular wages. On a $10,000 bonus the percentage method withholds $2,200 federal, $620 Social Security, $145 Medicare and $495 Illinois, leaving $6,540. There are no local income taxes in Illinois; Chicago taxes property and sales, not wages.
The aggregate method changes nothing on the Illinois line and raises the federal line to about $2,700 for a $60,000 earner paid every two weeks. Because the exemption is small and used up by salary, a bonus is taxed at the full 4.95% on the return and the state withholding settles exactly even.
What the withholding means for your Illinois return
Any refund on an Illinois bonus is federal. A $60,000 single filer's marginal federal rate is 12% up to $50,400 of taxable income and 22% above, so a $10,000 bonus is really taxed at about $1,450 federal against $2,200 withheld, and roughly $750 returns. Illinois residents who earn a bonus in Iowa, Kentucky, Michigan or Wisconsin are withheld for Illinois under the reciprocal agreements; one earned in Indiana or Missouri is withheld for that state and credited on the Illinois return. The Illinois paycheck calculator shows the marginal rates for any salary. Allowances on Form IL-W-4 reduce regular withholding by $2,925 each, but a bonus paid separately is withheld at the full 4.95% regardless of them.