How New York withholds on a bonus
New York State's withholding publication (NYS-50-T-NYS) sets supplemental withholding at 11.7%, the second highest rate in the country and above the state's 10.9% top bracket, which applies only above $25 million. New York City adds 4.25% for city residents and Yonkers 1.61%, set in the companion publications. On a $10,000 bonus the percentage method withholds $2,200 federal, $620 Social Security, $145 Medicare and $1,170 New York State, leaving $5,865; a New York City resident sees a further $425 withheld, neither city figure being included here.
The 11.7% rate is roughly double what most New Yorkers actually pay on a bonus. A single filer on $60,000 has a New York marginal rate of 5.4% (the bracket from $13,900 to $80,650 of taxable income), so the state over-withholds by about $630 on a $10,000 bonus and the excess returns at filing. Under the aggregate method New York applies its brackets to the combined paycheck instead, which for that earner withholds closer to 5.4% to 5.9%; the federal line rises to about $2,700.
What the withholding means for your New York return
A New York bonus produces one of the largest refunds of any state relative to its size: roughly $750 federal and $630 state on a $10,000 bonus for a $60,000 single filer, plus a city over-withholding of about $100 for city residents whose marginal city rate is 3.5% rather than 4.25%. New York's benefit recapture can reduce the state refund for filers above $107,650. New Jersey and Connecticut residents who earn a bonus in New York are withheld at 11.7% for New York and credit it at home. The New York paycheck calculator shows the marginal rates for any salary.