How to rotate in Photos on Mac without going out of bounds

I was trying to rotate a png photo of a top hat to overlay it on another photo as a joke for my husband. I was able to get the png into the Photos app on my Mac, but when I rotated it, it grew larger & went way out of bounds. How do I fix that? I tried making it smaller in Preview & then importing & rotating again, but all that changed was it got very pixelated. It still was too large. Please advise! Thanks so much.