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 2020. 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.
2020 Limitation Adjustments
Updated 11/15/19
COMPENSATION THRESHOLDS
- The limitation on the annual benefit under a defined benefit plan is $230,000.
- The compensation limit for defined-contribution plans is $57,000.
- The contribution limit for employees who participate in 401(k), 403(b), and most 457 plans and the federal government’s Thrift Savings Plan is $19,500.
- The annual compensation limit for qualified plans is $280,000. The salary threshold used in the definition of a “key employee” in a top-heavy plan is $185,000.
- The salary threshold used in the general definition of a highly compensated employee is $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 $104,000.
- The applicable dollar amount for all other taxpayers who are active participants (other than married taxpayers filing separate returns) is $65,000. 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 $196,000.
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 $65,000 and $75,000. For married couples filing jointly, if the spouse who makes the IRA contribution is an active participant, the income phase-out range is between $104,000 and $124,000. 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 $196,000 and $206,000. 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 $196,000. The adjusted gross income limitation for all other taxpayers (other than married taxpayers filing separate returns) is $124,000. 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 $196,000 to $206,000 for married couples filing jointly. For singles and heads of household, the income phase-out range is $124,000 to $139,000. 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 is $6,500. The dollar limitation for employees 50 and older who participate in 401(k) or 408(p) SIMPLE is $3,000.
- The annual compensation limit for eligible participants in certain governmental plans is $425,000. The compensation amount regarding simple employee pensions (SEPSs) is $600.
- The limitation for SIMPLE retirement accounts is $13,500.
RETIREMENT THRESHOLDS Continued
- The limitation concerning the qualified gratuitous transfer of qualified employer securities to an employee stock ownership plan is $50,000.
- The definition of a control employee for fringe-benefit valuation purposes is $115,000.
- The dollar limitation on premiums paid for a qualifying longevity annuity contract is $135,000.
- The adjusted gross income limitation for determining the retirement savings contributions credit for married taxpayers filing a joint return is $39,000.
- The adjusted gross income limitation for determining the retirement savings contributions credit for taxpayers filing as head of household is $29,250.
- The adjusted gross income limitation for determining the retirement savings contributions credit for all other taxpayers is $19,500.
- The limit on annual contributions to an individual retirement arrangement is $6,000.
2020 Tax Provisions
Updated 11/15/19
- Adoption Credit: The adoption tax credit is $14,300.
- Cafeteria Plans: The dollar limitation on voluntary employee salary reductions for contributions to health flexible spending arrangements is $2,750.
- Qualified Transportation Fringe Benefit: The monthly limitation for the qualified transportation fringe benefit and for qualified parking is $265.
- Standard Deductions: The standard deduction for heads of household is $18,650, $12,400 for singles and married couples filing separate returns, and $24,800 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 zero.
- Foreign Earned Income Exclusion: The foreign earned income exclusion amount is $107,600.
- Medical Savings Accounts: The annual deductible for self-only coverage in a medical savings account increases to not less than $2,350, and not more than $3,550. The maximum out-of-pocket expense amount is $4,750. The annual deductible for family coverage in a medical savings account is $4,750 and not more than $7,100. The out-of-pocket expense amount is $8,650.
- Qualified Small Employer Health Reimbursement Arrangement: To qualify, the total amount of the payments and reimbursements for any year cannot exceed $5,250 ($10,600 for family coverage).
FICA Rate and Wage Bases
Updated 10/10/2019
The Social Security wage base for 2020 is $137,700. 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. There is a 1.6 percent cost-of-living adjustment for 2020, affecting several thresholds for benefits and coverage.
FUTA Credit Reductions
Updated 11/15/2019
- U.S. Virgin Islands – 2.7% FUTA credit reduction.
2020 SUTA Wage Bases
Updated 11/15/19
- Arkansas: $10,000 to $7,000
- Colorado: $13,100 to $13,600
- Iowa: $30,600 to $31,600
- Kentucky: $10,500 to $10,800
- Minnesota: $32,000 to $34,000
- Missouri: $12,000 to $11,500
- Nevada: $31,200 to $32,500
- New Jersey: $34,400 to $35,300
- New Mexico: $24,800 to $25,800
- New York: $9,500 to $9,000
- Ohio: $23,500 to $24,300
- Oklahoma: $18,100 to $18,700
- Vermont: $15,600 to $16,100
- Washington: $49,800 to $52,700
- Wyoming: $25,400 to $26,400
Married Filing Jointly and Surviving Spouses
| If Taxable Income Is: | The Tax Is: |
|---|---|
| Not over $19,750 | 10% of the taxable income |
| $19,751-$80,250 | $1,975 plus 12% of the excess over $19,750 |
| $80,251-$171,050 | $9,235 plus 22% of the excess over $80,250 |
| $171,051-$326,600 | $29,211 plus 24% of the excess over $171,050 |
| $326,601-$414,700 | $66,543 plus 32% of the excess over 326,600 |
| $414,701-$622,050 | $94,735 plus 35% of the excess over $414,700 |
| Over $622,050 | $167,307.50 plus $37% of the excess over $622,050 |
Heads of Households
| If Taxable Income Is: | The Tax Is: |
|---|---|
| Not over $14,100 | 10% of the taxable income |
| $14,101-$53,700 | 1,410 plus 12% of the excess over $14,100 |
| $53,701-$85,500 | $6,162 plus 22% of the excess over $53,700 |
| $85,501-$163,300 | $13,158 plus 24% of the excess over $85,500 |
| $163,301-$207,350 | $31,830 plus 32% of the excess over $163,300 |
| $207,351-$518,400 | $45,926 plus 35% of the excess over $207,350 |
| Over $518,400 | $154,793.50 plus $37% of the excess over $518,400 |
Unmarried Individuals
| If Taxable Income Is: | The Tax Is: |
|---|---|
| Not over $9,875 | 10% of the taxable income |
| $9,876-$40,125 | $987.50 plus 12% of the excess over $9,875 |
| $40,126-$85,525 | $4,617.50 plus 22% of the excess over $40,125 |
| $85,526-$163,300 | $14,605.50 plus 24% of the excess over $85,525 |
| $163,300-$207,350 | $33,271.50 plus 32% of the excess over $163,300 |
| $207,351-$518,400 | $47,367.50 plus 35% of the excess over $207,350 |
| Over $518,400 | $156,235 plus $37% of the excess over $518,400 |
Married Filing Separately
| If Taxable Income Is: | The Tax Is: |
|---|---|
| Not over $9,875 | 10% of the taxable income |
| $9,876-$40,125 | $987.50 plus 12% of the excess over $9,875 |
| $40,125-$85,525 | $4,617.50 plus 22% of the excess over $40,125 |
| $85,526-$163,300 | $14,605.50 plus 24% of the excess over $85,525 |
| $163,301-$207,350 | $33,271.50 plus 32% of the excess over $163,300 |
| $207,351-$311,025 | $47,367.50 plus 35% of the excess over $207,350 |
| Over $311,025 | $83,653.75 plus $37% of the excess over $311,025 |
Estates and Trusts
| If Taxable Income Is: | The Tax Is: |
|---|---|
| Not over $2,600 | 10% of the taxable income |
| $2,601-$9,450 | $260 plus 24% of the excess over $2,600 |
| $9,451-$12,950 | $1,904 plus 35% of the excess over $9,450 |
| Over $12,950 | $3,129 plus 37% of the excess over $12,950 |
Withholding
Updated 11/15/19
- Beginning with the 2020 Form W-4, withholding allowances are no longer being used. For more information, see the draft Publication 15-T Federal Income Tax Withholding Methods and the IRS' FAQs on the draft 2020 Form W-4.
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