Why Your Bonus Comes with High Taxes — and Why Your Next Paycheck Looks Bigger

Many employees are surprised to see that when they receive a bonus or commission, their paycheck suddenly shows a much higher tax deduction. It can feel like half the bonus disappeared — but it’s actually just how the payroll tax system works.

🔹 How the Tax Calculation Works

In Israel, income tax is calculated monthly, but based on annual income.

When you receive a bonus, the payroll system temporarily assumes that your higher income will continue every month, and therefore moves you into a higher tax bracket for that month. For example, if your regular salary is 15,000 ILS and you receive a 10,000 ILS bonus, the system calculates tax as if your new monthly income is 25,000 ILS — which results in a higher tax deduction.

🔹 Why the Next Month Looks Better

In the following month, when your salary returns to normal, the payroll system automatically recalculates your annual income and realizes you’ve overpaid tax. That’s why your next paycheck often looks higher — the system simply refunds part of the extra tax that was withheld earlier

🔹 What You Can Do

• Don’t worry if your bonus month shows unusually high tax — it’s usually corrected automatically.

• If you receive a large annual bonus, you can request a tax adjustment ("Tium Mas") from your payroll department to avoid overpayment.

• At the end of the year, you can always apply for a tax refund if you’ve paid too much.

💡 Tip: The payroll system isn’t "punishing" you for your bonus — it’s just trying to estimate your total yearly income. Over time, it balances itself out