Free Commission Calculator: Sales Commission and Tiered Rates
Calculate a sales commission from a flat rate or a tiered plan with a higher rate above a threshold, add base pay and see the effective commission rate, plus how commissions are taxed in 2026.
Listen to this article
Commission pay rewards sales, but plans range from a simple percentage to tiers with higher rates once you pass a target. This free commission calculator works out the commission for a flat or tiered rate, adds your base pay and shows the effective rate, so you can check a pay statement or compare job offers.
Commission calculator
Commission plans differ: some pay on revenue, others on profit, after returns or only once the customer has paid. Check your written commission agreement for the exact rules.
Key takeaways
- $50,000 of sales at 5% is $2,500 of commission.
- With a tiered plan of 5% up to $40,000 and 8% above, the same sales earn $2,800, an effective rate of 5.6%.
- For employees, commissions are supplemental wages: if paid separately, federal income tax can be withheld at a flat 22% in 2026.
How to calculate commission
Commission = sales × commission rate
With a tiered (graduated) plan, each rate applies only to the sales within its tier, like tax brackets:
Commission = sales up to the threshold × rate 1 + sales above the threshold × rate 2
Example: $50,000 of sales, 5% on the first $40,000 and 8% above: $40,000 × 5% = $2,000 plus $10,000 × 8% = $800, a total of $2,800. Some plans instead pay the higher rate on all sales once the target is reached; that would be $50,000 × 8% = $4,000. Your commission agreement says which method applies.
Common commission structures
| Structure | How it works |
|---|---|
| Straight commission | Pay is only the commission, with no base salary |
| Base plus commission | A fixed salary or hourly wage plus a commission on sales |
| Tiered or graduated | Higher rates for sales above one or more thresholds |
| Draw against commission | An advance paid each period and subtracted from the commission earned later |
| Gross margin commission | The rate applies to the profit on a sale rather than the sale price |
Plans also differ on when a commission is earned: when the order is signed, when it ships or only once the customer has paid, and whether returns are deducted later. Get these rules in writing.
How commission pay is taxed in 2026
- Employees: commissions are wages and count toward Social Security (6.2%) and Medicare (1.45%). For federal income tax withholding, they are supplemental wages: when the employer pays them separately from regular pay, it may withhold a flat 22%, or 37% on supplemental wages above $1 million in a calendar year. Paid together with regular wages, they are withheld as one payment.
- Withholding is not the final tax: your actual income tax is set when you file, based on your total income. If the flat 22% is more or less than your real rate, the difference shows up as a refund or a balance due. The paycheck tax calculator estimates your 2026 tax.
- Independent contractors: nothing is withheld. You receive the full commission and pay income tax and self-employment tax yourself, usually through quarterly estimated payments. A business that paid you $2,000 or more in 2026 generally sends you a Form 1099-NEC.
Check a commission offer
- Compare the expected total pay, not just the rate: base pay plus commission at realistic sales.
- Ask how quotas and tiers reset (monthly, quarterly, yearly) and what happens with returns and canceled orders.
- Ask whether a draw must be paid back if commissions fall short.
- If you are an employee, make sure your total pay still meets minimum wage rules for the hours you work.
Frequently asked questions
How do I calculate a 5% commission?
Multiply the sales by 0.05. On $12,000 of sales, the commission is $600.
What is a tiered commission?
A plan with a higher rate for sales above a threshold. Usually the higher rate applies only to the sales above the threshold, the way tax brackets work.
Why is so much tax taken out of my commission check?
Employers often withhold a flat 22% federal income tax on commissions paid separately, plus Social Security, Medicare and any state tax. That is withholding, not your final tax; you settle the difference when you file.
Is commission taxed at a higher rate than salary?
No. Commissions and salary are taxed as the same income when you file. Only the withholding method can differ.
What is a draw against commission?
An advance that is later subtracted from the commissions you earn. Whether you must repay a draw that your commissions do not cover depends on your agreement.
