Gross-up

How do you calculate a gross-up?

Total every rate withheld from the payment, then divide the target net by one minus that total. The rates vary, so the same target can need a different gross for employees in different states. It also changes for an employee past the Social Security wage baseSocial Security wage base. The Social Security wage base is the maximum amount of an employee’s wages subject to Social Security tax in a calendar year: $184,500 (2026).Click to open the term, $184,500 (2026).

1. 01

   Start from the target net you want the employee to receive.

2. 02

   Add up the rates withheld from the payment, such as federal income tax, Social Security, Medicare, and any state and local taxes.

3. 03

   Divide the target net by one minus that total to find the gross.

4. 04

   Check the result by running normal withholding on the gross; it should land on the target.

What does a gross-up look like on a bonus?

Take a $1,000 net bonus in 2026, paid separately at the 22% federal flat rate. Social Security (6.2%) and Medicare (1.45%) bring the total to 29.65%. Divide the target by 0.7035, which is one minus 29.65%. The example assumes no state or local taxes and wages under the Social Security wage base.

1. =Gross bonus$1,421.46 in 2026, or the $1,000 target ÷ 0.7035
2. −Federal income tax$312.72 at the 22% flat rate
3. −Social Security$88.13 at 6.2%
4. −Medicare$20.61 at 1.45%
5. =Net bonus$1,000.00, the target (2026)

Work it out: one bonus

Enter the net amount the employee should receive, and any 401(k) deferral taken from the payment. The card divides by one minus the rates withheld, checks the result, and shows what adding the tax on top would leave short.

One payment in 2026, paid separately from regular wages: federal income tax at the 22% flat rate, 6.2% Social Security and 1.45% Medicare on the whole payment, and an optional 401(k) deferral, which is left out of income tax withholding but not out of Social Security and Medicare. Each deduction rounds to the cent, and the gross is the smallest that reaches the net. It leaves out state and local taxes, an employee past the Social Security wage base, $184,500 (2026), Additional Medicare Tax, the 37% rate on supplemental wages over $1 million, a payment withheld with regular wages under Form W-4 or for an employee whose regular wages had no income tax withheld this year or last, moving payments that are not wages, and paying the employee’s Social Security and Medicare tax yourself (the 0.9235 factor, with its own rule for household and agricultural employers). Other cases and state law can change the result.

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When do you use a gross-up?

Relocation is a common use, since moving expense reimbursements are taxable wages. Exceptions cover active-duty Armed Forces moves on a permanent change of station and some intelligence community relocations. A gross-up spares the employee tax on money meant to cover an expense. Awards, executive perks, and one-time bonuses get the same treatment when you want a round-number net. The added amount is taxable, so gross-ups add cost and suit occasional payments rather than regular wages. Confirm the treatment for each tax and state with a qualified professional before payroll runs.