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Do I have to pay back my sign-on bonus if I quit?

Short answer: often yes, if you signed a repayment agreement and you leave before its retention period ends. If nothing you signed requires repayment, there may be nothing to repay. Your offer letter or a separate repayment agreement sets the terms, and some states now limit them. This page is not legal advice or tax advice. For your own agreement, an employment lawyer in your state is the person to ask.

What decides whether you owe it?

The paperwork you signed. Sign-on bonus repayment usually lives in the offer letter or in a separate repayment agreement. Read it for these terms:

  • The retention period: how long you have to stay before the bonus is yours free and clear
  • Full or prorated: whether you owe the whole bonus or a share based on time remaining
  • The trigger: whether repayment applies only if you quit, or also if you are let go
  • Gross or net: whether the amount owed is the pre-tax bonus or what you actually received
  • The deadline, and whether the company says it can take the money from your final pay

If a term is missing or unclear, ask HR for the amount they think you owe, in writing, before you give notice.

Do state laws limit repayment?

Some do, and this area changed recently.

California: for contracts entered into on or after January 1, 2026, a state law known as AB 692 (Business and Professions Code section 16608 and Labor Code section 926) makes most "stay or pay" terms unlawful. It has an exception for a discretionary or unearned payment made at the start of a job that is not tied to specific job performance, such as a sign-on bonus. A repayment term for that kind of bonus fits the exception only if all of these are true:

  • The repayment terms are in a separate agreement from the main employment contract
  • You were told you have the right to consult a lawyer about the agreement and given a reasonable time, at least five business days, to do so before signing
  • Repayment carries no interest and is prorated to the time left in a retention period of no more than two years from when you received the money
  • You had the option to defer the bonus to the end of a fully served retention period, with no repayment obligation
  • You left by your sole choice, or were let go for misconduct as defined in California's unemployment insurance law

A worker covered by a term that breaks this law can sue for actual damages or $5,000, whichever is greater, plus attorney's fees and costs. Whether your agreement fits the exception is a question for a lawyer.

New York: the Trapped at Work Act (Labor Law sections 1050 to 1055) was signed on December 19, 2025 and changed by an amendment signed on February 13, 2026. As of September 2026 it is not in effect. Once it is, employers cannot require employees to sign "stay or pay" terms as a condition of employment. The law does not block repayment of a financial bonus, relocation help, or other incentive not tied to specific job performance, unless you were let go for any reason other than misconduct, or the duties or requirements of the job were misrepresented to you. The law does not define misconduct. The amendment says the law takes effect "one year after it shall have become a law," so law firms read the date as December 19, 2026 or February 13, 2027. It is also unsettled whether it covers agreements signed before that date. Enforcement is through complaints to the state labor commissioner, with fines of $1,000 to $5,000 per violation.

Other states may have their own rules. An employment lawyer can tell you which apply to you.

How is repaying a bonus taxed?

It depends on timing. If you repay in a later tax year than the year you were paid, IRS Publication 525 has specific rules.

  • For wages repaid in a later year, if the amount is more than $3,000, you may be able to take an itemized deduction or a tax credit for the year you repay, whichever gives less tax.
  • If the amount is $3,000 or less, Publication 525 says you generally cannot deduct it for tax years after 2017.
  • For Social Security and Medicare tax already paid on the bonus, the IRS says to ask your employer to refund the excess. If they refuse, get a statement of the overcollection and file Form 843.

A CPA can tell you how this lands on your own return.

What can you do before you give notice?

Check the date first. If the retention period ends soon, the cheapest move may be the calendar. Get the exact amount owed in writing. If you have an offer elsewhere, some people ask the new employer for a sign-on bonus that covers the repayment. That is a negotiation, not a guarantee.

Put the repayment next to everything else leaving costs: unvested equity, a vesting cliff, a 401(k) match that has not vested. One bill is easier to judge when you can see the whole number.

FAQ

Do I have to repay my sign-on bonus if I quit early? Often yes, if you signed a repayment agreement and leave before the retention period ends. The agreement controls, and some states limit these terms. Not legal advice.

Is sign-on bonus repayment prorated? Only if your agreement says so, or a state law makes proration a condition. In California, for agreements entered into on or after January 1, 2026, a sign-on repayment term fits the AB 692 exception only if repayment is prorated to the time left in a retention period of no more than two years, with no interest. New York's law does not set a proration rule for bonuses.

Do I repay the gross bonus or the amount after tax? Your agreement decides. Check whether it names the gross amount. For taxes on a repayment in a later year, IRS Publication 525 has the rules.

What if I was let go instead of quitting? Check the trigger in your agreement. In California, the AB 692 sign-on exception covers repayment only if you left by your sole choice or were let go for misconduct, as defined in the state's unemployment insurance law. In New York, once the Trapped at Work Act takes effect, a bonus repayment term is not protected if you were let go for any reason other than misconduct. An employment lawyer can check your case.

Where can you check this, and run your own dates?

Sources:

Related: Should I leave before my vesting cliff? and How long do I have to exercise stock options after leaving?

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