Payroll Tax Rates & 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 2023. 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.

2023 Limitation Adjustments

Updated 11/7/22

COMPENSATION THRESHOLDS

The limitation on the annual benefit under a defined benefit plan increased from $245,000 to $265,000.
The compensation limit for defined-contribution plans increased from $61,000 to $66,000.
The contribution limit for employees who participate in 401(k), 403(b), and most 457 plans and the federal government’s Thrift Savings Plan increased from $20,500 to $22,500.
The annual compensation limit for qualified plans increased from $305,000 to $330,000. The salary threshold used in the definition of a “key employee” in a top-heavy plan increased to $215,000.
The salary threshold used in the general definition of a highly compensated employee increased to $150,000.

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) has increased from $109,000 to $116,000.
The applicable dollar amount for all other taxpayers who are active participants (other than married taxpayers filing separate returns) increased from $68,000 to $73,000. 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 has increased from $204,000 to $214,000.

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 $68,000 and $78,000. For married couples filing jointly, if the spouse who makes the IRA contribution is an active participant, the income phase-out range is between $109,000 and $129,000. 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 $204,000 and $214,000. 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) increased from $204,000 to $218,000. The adjusted gross income limitation for all other taxpayers (other than married taxpayers filing separate returns) increased from $129,000 to $138,000. 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 $218,000 to $228,000 for married couples filing jointly. For singles and heads of household, the income phase-out range is $138,000 to $153,000. 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 increased from $6,500 to $7,500. The dollar limitation for employees 50 and older who participate in 401(k) or 408(p) SIMPLE increased from $3,000 to $3,500.
The annual compensation limit for eligible participants in certain governmental plans increased from $450,000 to $490,000. The compensation amount regarding simple employee pensions (SEPSs) is $750.
The limitation for SIMPLE retirement accounts increased from $14,000 to $15,500.

RETIREMENT THRESHOLDS Continued

The limitation concerning the qualified gratuitous transfer of qualified employer securities to an employee stock ownership plan increased from $55,000 to $60,000.
The definition of a control employee for fringe-benefit valuation purposes increased from $120,000 to $130,000. The compensation amount increased to $265,000.
The dollar limitation on premiums paid for a qualifying longevity annuity contract increased to $155,000.
The adjusted gross income limitation for determining the retirement savings contributions credit for married taxpayers filing a joint return is $43,500.
The adjusted gross income limitation for determining the retirement savings contributions credit for taxpayers filing as head of household is $32,625.
The adjusted gross income limitation for determining the retirement savings contributions credit for all other taxpayers is $21,750.
The limit on annual contributions to an individual retirement arrangement increased to $6,500.

2023 Tax Provisions

Updated 11/8/22

Adoption Credit: The adoption tax credit is $15,950.
Cafeteria Plans: The dollar limitation on voluntary employee salary reductions for contributions to health flexible spending arrangements increased to $3,050.
Qualified Transportation Fringe Benefit: The monthly limitation for the qualified transportation fringe benefit and for qualified parking increased to $300.
Standard Deductions: The standard deduction for heads of household is $20,800, $13,850 for singles and married couples filing separate returns, and $27,700 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 is $4,700. 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 increased to $120,000.
Medical Savings Accounts: The annual deductible for self-only coverage in a medical savings account increases to not less than $2,650, and not more than $3,950. The maximum out-of-pocket expense amount is $5,300. The annual deductible for family coverage in a medical savings account is $5,300 and not more than $7,900. The out-of-pocket expense amount is $9,650.
Qualified Small Employer Health Reimbursement Arrangement: To qualify, the total amount of the payments and reimbursements for any year cannot exceed $5,850 ($11,800 for family coverage).

FICA Rate and Wage Bases

Updated 11/8/22

The Social Security Tax Wage Base is $160,200 for 2023. The FICA contribution rate is 7.65%. 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% rate, although employees pay an additional 0.9% 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 8.7% cost-of-living adjustment (COLA) adjustment for 2023, affecting several thresholds for benefits and coverage.

2022 SUTA Wage Bases

Updated 11/10/22

Alaska: $45,200 to 46,8
Arizona: $7,000 to $8,000
Colorado: $17,000 to $20,400
Hawaii: $51,600 to $55,800
Idaho: $46,500 to $50,000
Iowa: $34,800 to $36,100
Minnesota: $38,000 to $41,000
Missouri: $11,000 to $10,500
Montana: $38,100 to $40,900
New Jersey: $39,800 to $41,100

New Mexico: $28,700 to $30,400
New York: $12,000 to $12,300
North Carolina: $28,000 to $30,000
Oklahoma: $24,800 to $25,700
Oregon: $47,700 to $51,600
Utah: $41,600 to $44,300
Vermont: $15,500 to $13,500
Washington: $62,500 to $67,600
Wyoming: $27,700 to $29,100

Married Filing Jointly and Surviving Spouses

Tax Rate	Taxable Income
10%	Up to $20,550
12%	$20,551 – $83,550
22%	$83,551 – $178,150
24%	$178,151 – $340,100
32%	$340,101 – $431,900
35%	$431,901 – $647,850
37%	Over $647,851

Heads of Households

Tax Rate	Taxable Income
10%	Up to $14,600
12%	$14,601 – $55,900
22%	$55,901 – $89,050
24%	$89,051 – $170,050
32%	$170,051 to $215,950
35%	$215,951 – $539,900
37%	Over $539,901

Unmarried Individuals

Tax Rate	Taxable Income
10%	Not over $10,275
12%	$10,276 – $41,775
22%	$41,776 – $89,075
24%	$89,076 – $170,050
32%	$170,051 – $215,950
35%	$215,951 – $539,900
37%	Over $539,901

Married Filing Separately

Tax Rate	Taxable Income
10%	Up to $10,275
12%	$10,276 – $41,775
22%	$41,776 – $89,075
24%	$89,076 – $170,050
32%	$170,051 – $215,950
35%	$215,951 – $323,925
37%	Over $323,926

Estates and Trusts

Tax Rate	Taxable Income
10%	Up to $2,750
24%	$2,751 – $9,850
35%	$9,851 – $13,450
37%	Over $13,451

Withholding

Updated 11/10/22

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 Form W-4.

How APS Can Help

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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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