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    What repaying a signing bonus costs after tax

    A signing bonus arrives net of withholding but is repaid in full. How much of the withheld tax comes back depends on the calendar year you repay it in. Numbers stay in your browser.

    Runs in your browserNot legal or financial advice

    Example values; replace them with your contract's terms.

    Bonuses are often withheld at the 22% federal supplemental rate; your marginal rate may differ.
    Buyout or liquidated damages (optional)
    Cash owed at exit
    —
    Beyond what that part of the bonus netted
    —
    The tax withheld on it, carried until any recovery
    Recoverable under IRS rules
    —
    Federal and FICA not recovered
    —
    State tax depends on the state and is not counted

    By month of exit

    The line is the bonus repayment owed. Dashed lines mark the start of a new tax year and $3,000. Shading marks months where the repayment is $3,000 or less in a later year, so the federal tax withheld on it stays paid.

    How common clawbacks are and how they are usually structured: Is my signing bonus clawback normal?

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    Questions for a CPA

      The rules this applies

      • Repaid in the same calendar year as the bonus: the repaid amount is not that year's income.
      • Repaid in a later year, $3,000 or less: not deductible, because miscellaneous itemized deductions are no longer allowed.
      • Repaid in a later year, over $3,000: the lower tax of an itemized deduction in the repayment year (method 1) or a credit for the tax the amount added in the year it was received (method 2, IRC 1341).
      • Social Security and Medicare tax on repaid wages: refunded by the employer, or claimed on Form 843.

      Source: IRS Publication 525, "Repayments" (2025 edition), checked 2026-10-26. The credit is estimated as the repaid amount times the bonus-year rate. This is arithmetic on the numbers entered, not tax advice.