Windfall Allocation Calculator
What landed, what you owe, and what you want in cash
Your result will appear here
Fill in the fields on the left and this updates as you type.
Know what this estimate is based on
- Jurisdiction
- General mathematical model
- Scope and limitations
- Planning estimate only. Enter complete, current figures and keep an appropriate buffer for irregular or unexpected expenses.
- Source links checked
- Jul 30, 2026
Built and regression-tested by Smart Tools Lab. It has not been individually reviewed by a licensed financial, tax, or legal professional.
How to use
- 01
Enter the headline amount and then the tax already taken out of it. A bonus is withheld at a flat 22% federal plus 7.65% FICA; a tax refund and, usually, an inheritance are not taxable income to you at all, so leave that field at 0 for those.
- 02
Enter the balance on your highest-rate debt and the rate it charges. The rate is the single number that decides where most of this windfall should go — take it from your statement rather than memory.
- 03
Enter one month of essentials — housing, food, utilities, transport, insurance and minimum payments only, not your normal spending — and the cash you already have set aside. The cushion is sized from months of essentials, never from a share of the windfall.
- 04
Set the share you will deliberately spend on something you want. Five to ten percent is the point; a plan with nothing in it for you is a plan that gets abandoned.
- 05
Read the schedule. It lists every destination in the order the money goes there and, beside each one, what that dollar actually earns — which is the whole reason the order is what it is.
Formula
What landed = headline amount − tax withheld. Spending slice = landed × your share. Cushion target = months of essentials × one month's essentials; cushion gap = target − cash on hand. Then, in order: a starter month of cash up to the gap; the high-rate balance if its rate beats the expected return; the rest of the cushion gap; and everything remaining is invested. First-year return = debt paid × its rate + total cash × the savings rate + invested × the expected return.
Example
An $18,000 bonus with $5,337 withheld — the flat 22% federal supplemental rate plus 7.65% FICA — so $12,663 actually landed. Essentials are $3,400 a month with $8,000 already set aside, making the three-month target $10,200 and the gap $2,200; the $8,000 already covers more than one month, so the starter leg takes nothing. Five percent, $633, is set aside to be spent. The $5,600 card balance charges 24%, which beats the 7% market assumption, so it is cleared in full and stops $1,344 of interest in its first year. The $2,200 cushion gap follows, taking cash to exactly three months of essentials. That leaves $4,230 invested. Across the whole windfall the split earns about $2,048 in its first year, a blended 16.17% — and it is the order, not the amount, that produced it.
Definitions
- Windfall
- A lump sum outside your normal income: a bonus, a tax refund, an inheritance, a settlement, or the proceeds of a sale. What differs between them is the tax, which is why this page starts from what actually landed.
- Supplemental wages
- Pay outside regular wages — bonuses, commissions, severance. Federal withholding on them is a flat 22%, rising to 37% on the part above $1,000,000. It is a withholding rate, not a tax rate.
- Essential spending
- One month of what you could not stop paying: housing, food, utilities, transport, insurance and minimum debt payments. The cushion is sized from this figure, not from your normal monthly spending.
- Guaranteed return
- What paying down a balance earns: exactly its interest rate, with no volatility and no tax. It is the reason a high-rate balance outranks the market in this page's ordering.
- Blended return
- The first-year return across the whole windfall, weighted by where each dollar went. It is the single figure that shows what the ordering bought you.
Good to know
Start from what landed, not from the letter
The most common way a windfall plan goes wrong is that it is built on the headline figure. An $18,000 bonus is not $18,000: federal withholding on supplemental wages is a flat 22%, employee FICA takes another 7.65%, and state tax comes after that — so roughly $12,663 lands, and a plan drawn against the larger number is already about a third short. Two things about that 22%. It is a withholding rate and not a tax rate, so it is squared up when you file: a household in the 12% bracket gets part of it back, and one in the 32% or 35% bracket will owe more, which is worth checking before the money is committed. And it rises to a flat 37% on any part of the payment above $1,000,000. Other windfalls behave completely differently, which is why the withholding field is yours to set rather than a rate the page assumes. A tax refund is your own money coming back and is not income at all. An inheritance is generally not taxable income to the recipient federally, though a few states levy an inheritance tax and an inherited retirement account is a genuine exception — every dollar distributed from an inherited traditional IRA is ordinary income. A settlement splits: physical-injury damages are generally excluded, while lost wages, punitive damages and interest are generally taxable.
Ranking by what each dollar earns
Once you know what landed, the allocation question has a real answer rather than a matter of taste, because each destination has a return you can name. Paying down a balance earns exactly its interest rate — guaranteed, tax-free, and unaffected by what any market does. Cash in a savings account earns whatever the account pays. Invested money earns an assumption. Line them up and a 24% card outranks everything by a distance no market assumption closes: $5,600 sent at that balance stops $1,344 of interest in the first year and keeps stopping it. That is why this page ranks rather than splitting into percentages. Percentages are a guess wearing the clothes of a plan, and they are wrong in both directions at once — they send money at a balance that is already small, and they starve a cushion that is genuinely empty. The one place ranking needs care is when the debt rate and the return assumption are close. The strict ordering will send the money to the market; treat that verdict sceptically, because the debt's return is certain and untaxed while the market's is neither, and check the low rate is not promotional and about to expire.
Why the cushion is a dollar target, not a share
The emergency fund leg is the one this page treats most differently from the calculators it replaces, and the difference is structural. A cushion is not sized by the windfall; it is sized by your own fixed costs. The target is a number of months of essential spending — housing, food, utilities, transport, insurance and minimum payments, which is a much smaller figure than your normal monthly spending — and what the windfall owes it is the gap between that target and the cash you already hold. A household with $8,000 against a $10,200 target needs $2,200 and no more, whatever the size of the bonus. A household with nothing needs the whole $10,200 and will not get there from one windfall. Three to six months is the usual rule, with six or more for a single income or a variable one. There is one deliberate exception to the strict return ranking: a starter month of cash goes ahead of even a high-rate balance. The reason is mechanical rather than sentimental. A household that empties its account onto a card has no way to absorb a tire, a furnace or a vet bill except the same card at the same rate, so the balance returns and the windfall bought nothing. One month of cash is what breaks that loop; everything after it is ranked strictly.
The slice that makes the plan survive
The last leg is the one that looks least rigorous and is load-bearing anyway: five to ten percent, taken off the top, to be spent on something you actually want. The case for it is behavioural and it is well supported by how these plans fail in practice. A windfall that vanishes entirely into duties leaves nothing to show for it, feels exactly like the windfall never happened, and reliably produces overspending on the next one to compensate. A visible, deliberate slice — $633 in the page's example — buys the discipline for the other ninety percent, and it works best when it is spent on something memorable rather than allowed to leak into a month of slightly larger grocery bills. Two closing points about what a good split actually bought you. First, measure it: the ordering in the worked example earns about $2,048 in its first year, a blended 16.17% across the whole windfall, almost all of it from clearing the card rather than from anything clever. Second, protect it. If the windfall clears a balance, keep making the payment you were already making afterwards. Paying a card off and then reverting to the minimum simply restarts the same interest clock at the same rate, and a year later the windfall is gone and the balance is back.
Frequently asked questions
What is the right order for a windfall?
Ranked by what each dollar earns: a deliberate spending slice off the top, a starter month of cash, any balance charging more than you expect to earn in the market, the rest of the cash cushion, then invest what is left. Paying a 24% balance is a guaranteed, tax-free, risk-free 24% return; nothing else on the page comes close to it.
Why does a month of cash come before the debt, if the debt earns more?
Because a household that empties its account onto a card has no way to absorb a tire, a furnace or a vet bill except the same card at the same rate — so the balance comes straight back and the windfall bought nothing. One month of essentials in cash is what stops the loop. Everything after that starter month is ranked strictly by return.
How much tax comes out of a bonus?
Federal withholding on supplemental wages is a flat 22%, and 37% on the part above $1,000,000, with employee FICA of 7.65% on top and state tax after that. But withholding is not your tax rate: it is settled when you file. Someone in the 12% bracket gets part of it back; someone in the 32% or 35% bracket will owe more.
Is an inheritance taxable?
Generally not as income to the person receiving it, federally. Three qualifications matter. A handful of states levy their own inheritance tax on the beneficiary. An inherited retirement account is a real exception — every dollar distributed from an inherited traditional IRA is ordinary income to you. And any income the inherited assets earn after you receive them is taxable in the ordinary way.
What about a legal settlement?
It splits, and the split matters. Damages for physical injury or physical sickness are generally excluded from income; lost wages, punitive damages and interest on the award are generally taxable. Set the withholding field to your own case rather than assuming the bonus treatment, and check with whoever handled the settlement before spending against a number.
Why does the page not just split the money into percentages?
Because percentages are a guess dressed up as a plan, and they are wrong in both directions. The cushion is a dollar target — months of essentials less what you already hold — so a household that is nearly there needs almost nothing, and one starting from zero needs far more than any percentage would give it. The debt leg is capped by the balance, not by a share. Both are facts about you, not about the size of the windfall.
My debt rate is below the return assumption. Should I really invest instead?
Read that verdict carefully. The strict ranking sends the money to the market, but the debt's return is guaranteed and tax-free while the market's is neither, so at anything close to a tie most households are better off clearing the balance. The save-versus-pay-off-debt page runs the comparison properly. And check that the low rate is not a promotional one about to expire.
Why is there a slice for spending at all?
Because it makes the rest of the plan survive. A windfall that vanishes entirely into duties feels like nothing happened, and the next one gets spent freely to compensate. Five to ten percent, taken off the top and spent on something you will actually remember, is what buys the discipline for the other ninety.