Here are nine ways to use a holiday bonus to extend its benefits into the new year and beyond.
- Pay off debt.
- Max out your retirement accounts.
- Invest in an index fund.
- Check in on your emergency fund.
- Contribute to a 529 plan.
- Invest in yourself.
- Move that bonus into a high-yield account quickly.
- Save for your next vacation.
What do you need to know about cash bonuses?
Key Takeaways 1 A cash bonus is a lump sum awarded to an employee for good performance, often evaluated on an annual basis and paid out… 2 Called a supplemental wage by the IRS, cash bonuses are often subject to a flat tax of 22%. 3 Cash bonuses can impact the economy—high cash bonuses can lead to a spike in demand for luxury items. More …
How are annual bonuses and profit sharing work?
Annual Bonus An annual bonus is usually based on overall company performance. So you may get a large or small bonus (or no bonus at all) depending on how successful your organization or specific department was that year, as well as how big a part of that success you were. This can also be considered “profit sharing.”
When do you get a signing bonus from a company?
A signing bonus is a one-time bonus provided when you sign on to a new role. Companies might offer it when an employee is walking away from something better, or if the employee is moving to a new city for the job and the company wants to cover some of the costs (this could also be in the form of a relocation bonus or package).
Can a bonus be used to catch up on taxes?
Yes, the heading here sounds like a no-brainer. But let’s be a bit more specific: One beneficial way to use your bonus is to “catch up” on estimated tax payments or your withholding-tax obligations and thereby sidestep an IRS penalty for coming up short. 6 And that’s not all you can do.
