Windfall calculator: what to do with a tax refund, bonus or inheritance

How should I split a refund, bonus or inheritance?

Split a lump sum down the order

Enter the amount. The lab sets aside fun money, then fills each step of the Next dollar order up to its room. Drag a slider to change the split. The values shown are samples.

Using a sample order. Run the Next dollar lab to use your own.

The money

Amount received*

What it is

Is it already taxed?

The lab only estimates tax on a bonus or back pay.

Fun money share: 10%

Set apart before the order, so the plan does not feel like a lockdown. The default is 10%.

Adjust the split

Each slider stops at that step's room from the Next dollar order.

High-interest debt$4,000

Emergency fund$500

IRA$0

Taxable investing and goals$0

$5,000

to place: $500 for fun money, $4,000 to high-interest debt, $500 to emergency fund.

Today: make the transfers listed under the receipt.

Receipt

Amount received: $5,000
To place: $5,000
Fun money: $500
Starter cash cushion: $0
High-interest debt: $4,000
Emergency fund: $500
HSA: $0
IRA: $0
Taxable investing and goals: $0
Left to place: $0

Moves that put this split in place today

Set $500 aside to spend on something you want.
Pay $4,000 toward the highest-rate balance.
Move $500 into a savings account for the emergency fund.

Educational, not advice. The split follows the Next dollar order, with fun money set aside first. It simplifies: tax on a bonus or back pay is estimated as 22% federal withholding (37% over $1,000,000 a year) plus 7.65% payroll tax, and leaves out state tax, the Social Security wage base and the real tax bill. A 401(k) takes payroll deferrals, so it is left off, and the match cannot be reached with a lump sum. IRS publication 15 for 2026 · IRS topic 751 · Bogleheads: Prioritizing investments

How this calculator works

The split uses the same order as the Next dollar lab. If you have run that lab in this browser, the room for each step carries over. If not, a sample order is used and the page says so.
Fun money comes first. It is money you spend without tracking it against a goal. It defaults to 10% of what you can place, and you can set it anywhere from 0% to 50%.
A bonus or back pay paid before withholding is taxed before you see it. Employers withhold a flat 22% federal on supplemental pay, or 37% on the part of the year's supplemental pay over $1,000,000, plus 6.2% Social Security and 1.45% Medicare. The lab subtracts those to show what is left to place.
Each step takes money until its room is full, then the rest moves down. Every slider stops at its step's room. Whatever remains after the IRA goes to taxable investing or a goal.
A 401(k) takes payroll deferrals, so it is not on the receipt. A match is earned the same way, so a lump sum cannot be sent to it.

A $5,000 tax refund

A refund is already taxed, so $5,000 is all there is to place. Fun money at 10% is $500, leaving $4,500. With the sample order, the $4,000 card at 22% takes $4,000, and the last $500 goes to the emergency fund, which still has $4,000 of room. Nothing reaches the IRA or taxable investing. With a $10,000 untaxed bonus instead, withholding is $2,200 and payroll tax is $765, so $7,035 is left to place.

What this assumes

The tax estimate covers a bonus or back pay only. A refund, inheritance or gift is treated as money you can place in full.
State tax, the Social Security wage base and the 0.9% Additional Medicare Tax are not modeled.
Withholding is not the final tax. Your return settles the real amount, so the actual bill can be higher or lower.
The order and the room come from the Next dollar lab, with its defaults for the starter fund and the debt cutoff.
The split is a starting point. You can drag any slider, and the receipt shows how much is left to place.

Finance Quest is educational. It is not financial advice, and no calculator here knows your full situation.

The mistake: planning around the gross bonus

A $10,000 bonus announced in a meeting does not arrive as $10,000. At the flat 22% federal withholding plus 7.65% payroll tax, $7,035 arrives before state tax. People who plan the full $10,000 find the money is short on payday. Plan around the net.

Common questions

Why is my bonus taxed at 22%?

The IRS lets employers withhold a flat 22% federal rate on supplemental wages such as bonuses, or 37% on the part of the year's supplemental pay over $1,000,000. That is withholding, not your final tax. The return settles the real amount at your own rates.

Can a windfall go to my 401(k)?

Not directly. A 401(k) takes payroll deferrals, so a lump sum cannot be deposited into it, and an employer match is earned through those deferrals.

Why set aside fun money?

It is a share you spend without tracking it against a goal. The default is 10%, and you can set it to 0% to skip it.

Does the lab tax a refund?

A federal refund returns tax you already paid, so the lab does not estimate tax on it.

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