Payroll Taxes: Rates and Changes
Find out the latest on payroll tax rates and
changes and how they may affect your
business so you can maintain compliance.
Following is a list of scheduled limitation adjustments and tax provision changes effective 2021. As additional changes are released, we will update this information. It is important to be familiar with changes in payroll taxes each year to accurately process payroll.
2021 Limitation Adjustments
Updated 11/16/20
COMPENSATION THRESHOLDS
- The limitation on the annual benefit under a defined benefit plan remains unchanged at $230,000.
- The compensation limit for defined-contribution plans is $58,000.
- The contribution limit for employees who participate in 401(k), 403(b), and most 457 plans and the federal government’s Thrift Savings Plan remains unchanged at $19,500.
- The annual compensation limit for qualified plans is $290,000. The salary threshold used in the definition of a “key employee” in a top-heavy plan remains unchanged $185,000.
- The salary threshold used in the general definition of a highly compensated employee remains unchanged at $130,000.
IRA THRESHOLDS
- The applicable dollar amount for determining the deductible amount of an IRA contribution for taxpayers who are active participants filing a joint return or as a qualifying widow(er) is $105,000.
- The applicable dollar amount for all other taxpayers who are active participants (other than married taxpayers filing separate returns) is $66,000. If an individual or the individual’s spouse is an active participant, the applicable dollar amount for a married individual filing a separate return is not subject to an annual cost-of-living adjustment and remains $0.
- The applicable dollar amount for a taxpayer who is not an active participant but whose spouse is an active participant is $198,000.
IRA THRESHOLDS Continued
- The deduction for taxpayers making contributions to a traditional IRA is phased out for single individuals and heads of household who are active participants in a qualified plan (or another specified retirement plan) and have adjusted gross incomes between $66,000 and $76,000. For married couples filing jointly, if the spouse who makes the IRA contribution is an active participant, the income phase-out range is between $105,000 and $125,000. For an IRA contributor who is not an active participant and is married to someone who is an active participant, the deduction is phased out if the couple’s income is between $198,000 and $208,000. For a married individual filing a separate return who is an active participant, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
- The adjusted gross income limitation for determining the maximum Roth IRA contribution for married taxpayers filing a joint return or for taxpayers filing as a qualifying widow(er) is $198,000. The adjusted gross income limitation for all other taxpayers (other than married taxpayers filing separate returns) is $125,000. The applicable dollar amount for a married individual filing a separate return is not subject to an annual cost-of-living adjustment and remains $0.
- The adjusted gross income phase-out range for taxpayers making contributions to a Roth IRA is $198,000 to $208,000 for married couples filing jointly. For singles and heads of household, the income phase-out range is $125,000 to $140,000. For a married individual filing a separate return, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
RETIREMENT THRESHOLDS
- The dollar limitation for employees 50 and older who participate in an employer plan other than a 401(k) or 408(p) SIMPLE remains unchanged at $6,500. The dollar limitation for employees 50 and older who participate in 401(k) or 408(p) SIMPLE remains unchanged at $3,000.
- The annual compensation limit for eligible participants in certain governmental plans is $430,000. The compensation amount regarding simple employee pensions (SEPSs) is $650.
- The limitation for SIMPLE retirement accounts remains unchanged at $13,500.
RETIREMENT THRESHOLDS Continued
- The limitation concerning the qualified gratuitous transfer of qualified employer securities to an employee stock ownership plan remains unchanged at $50,000.
- The definition of a control employee for fringe-benefit valuation purposes remains unchanged at $115,000. The compensation amount is $235,000.
- The dollar limitation on premiums paid for a qualifying longevity annuity contract remains unchanged at $135,000.
- The adjusted gross income limitation for determining the retirement savings contributions credit for married taxpayers filing a joint return is $39,500.
- The adjusted gross income limitation for determining the retirement savings contributions credit for taxpayers filing as head of household is $29,625.
- The adjusted gross income limitation for determining the retirement savings contributions credit for all other taxpayers is $19,750.
- The limit on annual contributions to an individual retirement arrangement remains unchanged at $6,000.
2021 Tax Provisions
Updated 11/16/20
- Adoption Credit: The adoption tax credit is $14,400.
- Cafeteria Plans: The dollar limitation on voluntary employee salary reductions for contributions to health flexible spending arrangements remains $2,750.
- Qualified Transportation Fringe Benefit: The monthly limitation for the qualified transportation fringe benefit and for qualified parking remains $270.
- Standard Deductions: The standard deduction for heads of household is $18,880, $12,550 for singles and married couples filing separate returns, and $25,100 for married couples filing jointly.
- Exempt Amount of Wages, Salary, and Other Income: The dollar amount used to apply to tax levies for years when the personal exemption amount remains zero. This elimination of the personal exception was a provision in the Tax Cuts and Jobs Act.
- Foreign Earned Income Exclusion: The foreign earned income exclusion amount is $108,700.
- Medical Savings Accounts: The annual deductible for self-only coverage in a medical savings account increases to not less than $2,400, and not more than $3,600. The maximum out-of-pocket expense amount is $4,800. The annual deductible for family coverage in a medical savings account is $4,800 and not more than $7,150. The out-of-pocket expense amount is $8,750.
- Qualified Small Employer Health Reimbursement Arrangement: To qualify, the total amount of the payments and reimbursements for any year cannot exceed $5,300 ($10,700 for family coverage).
FICA Rate and Wage Bases
Updated 11/16/20
The Social Security Tax Wage Base is $142,800 for 2021. The FICA contribution rate is 6.2%. For the Medicare (HI) portion of the FICA taxes, there is no wage base and all wages earned are subject to the HI tax, which is also paid by employers and employees. Each pays at a 1.45 percent rate, although employees pay an additional 0.9 percent on wages greater than $200,000 for individuals, $250,000 for married couples filing jointly, and $125,000 for married couples filing separately. It is estimated there will be a 1.3 percent cost-of-living adjustment (COLA) adjustment for 2021, affecting several thresholds for benefits and coverage.
2020 FUTA Credit Reductions
Updated 11/10/2020
Virgin Islands: 3.0%
2021 SUTA Wage Bases
Updated 11/5/20
- Alaska: $41,500 to $43,600
- Arkansas: $7,000 to $10,000
- Idaho: $41,600 to $43,000
- Illinois: $12,740 to $12,960
- Iowa: $31,600 to $32,400
- Kentucky: $10,800 to $11,100
- Michigan: $9,000 to $9,500
- Minnesota: $35,000 to $36,000
- Montana: $34,100 to $35,300
- Nevada: $32,500 to $33,400
- New Jersey: $35,300 to $36,200
- North Carolina: $25,200 to $26,000
- Oklahoma: $18,700 to $24,000
- Oregon: $42,100 to $43,800
- Utah: $36,600 to $38,900
- Washington: $52,700 to $56,500
- Wyoming: $26,400 to $27,300
Married Filing Jointly and Surviving Spouses
| Tax Rate | Taxable Income |
|---|---|
| 10% | Up to $19,900 |
| 12% | $19,901-$81,050 |
| 22% | $81,051-$172,750 |
| 24% | $172,751-$329,850 |
| 32% | $329,851-$418,850 |
| 35% | $418,851-$628,300 |
| 37% | Over $628,300 |
Heads of Households
| Tax Rate | Taxable Income |
|---|---|
| 10% | Up to $14,200 |
| 12% | $14,201 to $54,200 |
| 22% | $54,201 to $86,350 |
| 24% | $86,351 to $164,900 |
| 32% | $164,901 to $209,400 |
| 35% | $209,401 to $523,600 |
| 37% | Over $523,600 |
Unmarried Individuals
| Tax Rate | Taxable Income |
|---|---|
| 10% | Not over $9,950 |
| 12% | $9,951-$40,525 |
| 22% | $40,526-86,375 |
| 24% | 86,376-$164,925 |
| 32% | $164,926-$209,425 |
| 35% | $209,426-$523,600 |
| 37% | Over $523,600 |
Married Filing Separately
| Tax Rate | Taxable Income |
|---|---|
| 10% | Up to $9,950 |
| 12% | $9,951-$40,525 |
| 22% | $40,526-$86,375 |
| 24% | $86,376-$164,925 |
| 32% | $164,926-$209,425 |
| 35% | $209,426-$314,150 |
| 37% | Over $314,150 |
Estates and Trusts
| Tax Rate | Taxable Income |
|---|---|
| 10% | Up to $2,650 |
| 24% | $2,651-$9,550 |
| 35% | $9,551-$13,050 |
| 37% | Over $13,051 |
Withholding
Updated 11/16/20
- Withholding allowances are no longer being used. This change is meant to increase transparency, simplicity, and accuracy of the form. For more information, see the IRS' Publication 15-T Federal Income Tax Withholding Methods and the FAQs on the 2020 Form W-4.
How APS can help
APS’ payroll tax compliance experts handle all of the paperwork and filings, keeping you in compliance:
- Preparation of your quarterly tax payments and filings
- System update of federal tax tables each year
- Year-end payroll processing assistance
The information on this page is subject to change at any time based on tax regulation updates. To stay current on payroll processing issues and payroll tax news. subscribe to the APS Blog.
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