How To Spend (and Invest) Your Bonus

You thought that the most wonderful time of the year was over? Think again, because bonus season is here, and with it, there are decisions to be made on what to do with your hard-earned windfall. After the responsible boxes are checked — retirement, emergency savings, core investments — what’s left is the fun money. We’re here to help you decide how best to use it all.

Any spending plan should start with the after-tax number.

In the US, bonuses are usually treated as supplemental wages, and typically subject to a flat 22% federal withholding up to $1 million and 37% above that, though some employers instead fold them into regular paychecks and tax them as ordinary income. Bonuses also face payroll taxes — including those used to fund Social Security and Medicare — along with state and local levies. Equity compensations such as restricted stock units, or RSUs, are also withheld at the same 22% once the stock vests, says John Boyd, the founder and lead adviser at MDRN Wealth.

A key caveat: Withholding isn’t the same as what you ultimately owe. A large bonus can push you into a higher tax bracket, especially when combined with investment gains and other income, leaving some earners with an unexpected tax burden.

That’s why experts like Ashley Bleckner, a managing director and private wealth adviser at Ellevest, recommend estimating your true tax bill once your boss shares your bonus payout for the year, setting aside cash for April — ideally in an interest-bearing account — and resisting the urge to let the entire bonus inflate your lifestyle or sit idle.

For the Passionate: Collectibles

There’s a reason billionaires buy art, wine and classic cars. Collectibles offer long-term appreciation, diversification, personal enjoyment and, depending on your taste, social cachet. Best-case scenario, maybe you even end up with an heirloom worthy of passing down.

For investors without an extensive wine cellar or the right wall for a $236 million Gustav Klimt, consider a few more accessible options. Funds specializing in rare wines, such as RareWine Invest, and platforms like Masterworks and Artemundi that offer fractional ownership in blue-chip artwork, have broadened the market, according to Thomas Hainlin, the national investment strategist at US Bank Asset Management.

The challenge? Performance of collectibles is harder to track, say, than a stock index, and prices often move with the fortunes of wealthy buyers. Whether you buy the physical asset or just a share, this path is for those who genuinely enjoy having the equivalent of a trophy.

For the Connected: Private Markets

Companies are staying private for longer — and some such as SpaceX and OpenAI are reaching trillion-dollar valuations before they even go public. Those investors who want broader growth exposure should look beyond public markets, says Mitchell Caplan, the chief executive officer of alternative investments platform Willow Wealth. With more than 25 million private companies in the US and fewer than 4,000 public ones, many investors are missing a huge part of the pie.

The trade-off is locking up cash for the potential of higher returns, says Caplan. Newer vehicles — such as evergreen funds, which continuously raise capital to invest in private companies, and interval funds, which allow periodic redemptions rather than daily liquidity — aim to make private markets more accessible for wealthy retail investors. Most require accredited-investor status as defined by the Securities and Exchange Commission, though there are some exceptions, including ARK Venture Fund, Cathie Wood’s interval fund, as well as exchange-traded funds XOVR and RONB, which all offer some access to SpaceX pre-IPO.

That premium obviously comes with risk. Private companies face fewer disclosure requirements, increasing the burden of due diligence on investors, warns Stephanie Guild, the chief investment officer at Robinhood Markets.

And don’t expect to get your money out easily. Morningstar portfolio strategist Amy Arnott cautions against locking up any money you may need within 5 to 10 years.

For the Cowboys: Prediction Markets

Prediction markets let people put money behind a specific outcome — everything from Federal Reserve interest-rate cuts to election results to the second coming of Jesus Christ. While sports outcomes dominate the volume, contracts also cover events such as government shutdowns or how much snow will fall in New York City.

The appeal is precision. These markets allow participants to express a narrow, targeted view, often feeling closer to trading than investing. That said, Bleckner cautions that money placed in prediction markets should be treated strictly as entertainment — not a wealth-building path. “People blur the line between investing and trading,” she adds. “Don’t forget prediction markets are just for fun.” Casual users making a prediction on the Super Bowl or another sporting event — by far the most popular category on the platforms — should also know that they’re likely going up against professional gamblers, aka sharps or sharks.

For the Diversifiers: Gold

Prices for gold and silver, everybody’s favorite precious metals, have receded from their recent record highs. While making an initial investment now will yield you less of the precious metal than it would have a year ago, what portfolio could ever be complete without the ultimate “safe haven” asset in the proverbial safe?

The simplest route is a gold ETF, which offers liquid exposure and easy market trading, according to Hainlin. Two of the world’s largest are SPDR Gold Shares and iShares Gold Trust. Or go fully tangible by purchasing physical gold from Costco, which sells gold bars and coins at a 2% markup, or even a bullion dealer. That last option comes with drawbacks, including storage, security and the hassle of selling. Gold isn’t something US Bank recommends as a core holding, Hainlin says, though for some investors, the appeal lies in the certainty of owning something they can see — and touch. You might also consider buying a safe as long as you’re at Costco.

Of course there are a million different ways to spend your millions — or thousands, depending on the circumstances of your previous fiscal year. So ignore the price point and consider these eight categories as inspiration starters for whatever you can afford, be it pure indulgence or an item or experience that will pay memorable dividends for years to come.

For Heavyweights: Appreciated Stocks

Resist the impulse to donate cash from your bonus directly to your charity of choice. Instead, consider raiding your brokerage account for highly appreciated holdings and donate those shares directly, either to a charity or through a donor-advised fund (DAF). Doing so allows investors to claim a deduction at the current market value while avoiding capital gains taxes, says Boyd.

Bonus cash can then be used to repurchase the position if maintaining exposure is the goal, adds Bleckner.

The biggest tax benefit comes from donating shares with the lowest acquisition price, often the earliest purchases of a winning stock such as Nvidia Corp. This also applies if you’re gifting to heirs. When giving to individuals instead of charities, age and tax bracket matters. Younger recipients or those in a lower bracket may owe less tax when they sell, while high earners may benefit more from inheriting shares later with a step-up in cost basis, which resets the value at death and eliminates capital gains prior to appreciation.

For the Tax-Conscious: Donor-Advised Funds

DAFs allow investors to claim an immediate tax deduction while spreading out charitable giving over time. Contributions can be invested and grow tax-free, with donors choosing portfolios based on risk and expected timing of grants, says Morningstar’s Arnott.

As outlined above, funding a DAF with long-term appreciated stock rather than cash creates the double benefit of no capital gains tax and a deduction for the full market value, according to Hayley Dickson, the founder and CEO of Rippl Wealth Management. The setup is straightforward, and donors are not locked into a specific charity or timeline upfront.

For Parents: Superfund 529 Accounts

The 2026 annual gift tax exclusion is $19,000 per person, though 529 education accounts provide a loophole. You can add five years’ worth in a single contribution — $95,000 per beneficiary — without triggering gift or estate tax consequences, says Dickson. The strategy, known as superfunding, helps move assets out of an estate while jump-starting education savings during high-income years.

Earnings grow tax-free and withdrawals are tax-free when used for qualified education expenses, a rare triple win. The trade-off is flexibility. Funds in a 529 are, for the most part, limited to education expenses, making them best suited for families confident about how the money will be used, says Bleckner.