2025 Federal Payroll Tax Rates

Following is a summary of the federal 2025 payroll tax changes including Social Security, Medicare, Unemployment Tax, Minimum Wage, 401(k) limits, and more.

Federal Unemployment Tax

The wage base remains at $7,000. The effective tax rate for 2025 is 0.6%.

Federal Minimum Wage

The federal minimum wage rate per hour for 2025 is $7.25, effective 7/24/09. Refer to your state’s minimum wage law and rate.

Social Security / Medicare

The wage base increases to $176,100 for Social Security and remains UNLIMITED for Medicare. For Social Security, the tax rate is 6.20% for both employers and employees. (Maximum Social Security tax withheld from wages is $10,918.20 in 2025). For Medicare, the rate remains unchanged at 1.45% for both employers and employees.

Additional Medicare Tax

A 0.9% additional Medicare tax must be withheld from an individual’s wages paid in excess of $200,000 in a calendar year. There is no employer match for the additional Medicare tax.

Earnings Under Social Security

A social security beneficiary under full retirement age can earn $23,400 before benefits are reduced. For every $2 a person under full retirement age earns over $23,400, $1 is withheld from benefits.  In the year an employee reaches full retirement age, $1 in benefits will be withheld for each $3 they earn above $62,160 until the month the employee reaches full retirement age. Once an employee reaches full retirement age or older, their benefits are not reduced regardless of how much they earn.

401(K) Plan Limits

The maximum employee pretax contribution increases to $23,500 in 2025. The “catch-up” contribution remains at $7,500 for individuals age 50 or older. Starting in 2025, individuals aged 60-63 have an increased “catch-up” contribution of $11,250 instead of the $7,500.

SIMPLE Plan Limits

The maximum salary deferral contribution increases to $16,500 in 2025. The “catch-up” contribution remains at $3,500 for individuals age 50 or older.

Forms W-4, I-9 and W-9

All new employees are required to file Forms W-4 and I-9 which are to be kept on file by the employer. A new Form W-4 should be obtained when an employee’s filing status or exemption changes. Be sure to request and keep on file a completed Form W-9 from all non-corporate taxpayers to whom your company pays commissions, interest, rents, etc., totaling $600 or more, and also payments made to certain incorporated entities such as attorneys for legal services and providers of medical and health care services.

Filing of Form W-2 and 1099

The IRS electronic filing requirement remains at 10 or more information returns. If you need to file electronically via the Social Security’s Business Services Online (BSO) visit ssa.gov/employer for more information about using the BSO.  Form 1099 must provide the payer telephone number or will be subject to penalties.

W-2 and 1099 Filing Deadline for Employers

The due date for filing 2024 Form W-2 with the Social Security Administration is January 31, 2025. Non-employee compensation, such as payment to independent contractors, will continue to be reported on Form 1099-NEC instead of 1099-MISC. The 1099-NEC return is also due January 31, 2025.

Health Benefits W-2 Reporting

Employers are required to include the aggregate cost of employer sponsored health benefits on the 2024 W-2’s in Box 12 with code DD. It is for informational purposes only and will not be included in taxable income. Please contact us regarding the specific types of health benefits to be recorded. Small employers who file fewer than 250 W-2 Forms are exempt.

Electronic Federal Tax Payment System (EFTPS)

Employers must pay their Federal Tax Liabilities through the Electronic Federal Tax Payment System unless they pay less than $2,500 in quarterly payroll tax liabilities and pay their liability when filing their employment tax returns (Forms 941 and 944).

Household Employment – Domestic Workers

Household employers are required to withhold and pay FICA for domestic workers (age 18 and older) if paid cash wages of $2,800 or more in 2025. The $1,000 per calendar quarter threshold continues to apply for FUTA. These taxes are reported on Schedule H of the employer’s personal tax return (Form 1040), but must be remitted through withholding or estimated payments during the year. For PA and NJ, unemployment coverage applies for domestic service in an employer’s private home for cash wages of $1,000 or more in a calendar quarter in the current or preceding calendar year.

New Hire Reporting Requirements

All employers are required to report basic information about employees who are newly hired or rehired. Please refer to your state’s specific requirements and reporting process.

Basic employee information which must be provided:

1. Employee’s name
2. Employee’s address
3. Employee’s social security number
4. Employee’s date of hire and birth
5. Employer’s name and address
6. Employer’s federal identification number