In 2025, several changes to payroll taxes and related deductions are being implemented across various states and at the federal level. Here’s an overview of the most significant updates:
Federal Payroll Taxes
– Social Security Taxable Wage Base: The taxable wage base for Social Security is increasing to $176,100 in 2025. This means that earnings above this threshold will not be subject to Social Security tax.
–Federal Income Tax Brackets: The IRS has adjusted federal income tax brackets for inflation, which may affect take-home pay. The tax rates remain the same (10%, 12%, 22%, 24%, 32%, 35%, and 37%), but the income thresholds have been increased. For single filer’s, the top rate of 37% applies to incomes over $626,350, while for married couples filing jointly, it applies to incomes over $751,600.
State-Specific Payroll Taxes
– California: Starting in 2025, California workers will see an increase in payroll tax withholdings due to Senate Bill 951. For individuals earning around $100,000, there will be an estimated additional withholding of $100 from their paychecks, with variations based on total taxable income.
– Washington State: The Paid Family and Medical Leave premium rate is set to rise to 0.92% of wages, with employers covering approximately 28.48% of this total.
– New York: Contributions to the New York Paid Family Leave program will increase to 0.388% of an employee’s gross wages, capping at a maximum annual contribution of approximately $354.53.
– Maryland: Beginning July 1, 2025, payroll deductions for Maryland’s Family and Medical Insurance will commence, leading into its launch in July 2026.
Other Relevant Changes
– Standard Deductions: The standard deduction for federal income taxes has increased significantly for 2025 — $30,000 for married couples filing jointly and $15,000 for single filers.
– Retirement Contribution Limits* The limits for contributions to retirement accounts like 401(k)s have also been adjusted, with elective deferral limits increasing to $23,500.
These changes reflect adjustments aimed at accommodating inflation and evolving state policies regarding family leave and other benefits. It’s important for employees and employers alike to stay informed about these updates to effectively manage payroll and tax obligations in the coming year.