How is a signing bonus taxed?

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.

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.