Q:

How is a signing bonus taxed?

A:

Quick Answer

A signing bonus is taxed at the recipient's marginal tax rate. This means that a large part of the bonus goes to the federal and state government.

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Full Answer

Businesses offer signing bonuses to prospective employees to attract them to join the company. The bonus is often issued in one or two lump-sum payments and may also consist of stock options. These bonuses are offered to highly qualified candidates as an incentive to accept a position that may also be offered by another company. In most cases, quitting after a short time after accepting a position means that the employee has to return the bonus in total or in part.

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