2025 Supplemental Tax Charges By State

What occurs once you pay worker commissions or bonuses? It’s possible you’ll want to make use of a supplemental flat tax fee for federal and state earnings taxes. Not all states require supplemental tax charges. So, check out the supplemental tax charges by state to see in case your state does.

What’s supplemental tax?

Earlier than we get into the supplemental tax charges by state, let’s evaluate supplemental earnings tax. Supplemental earnings tax is assessed on supplemental wages (e.g., bonuses, commissions, and so forth.). The federal supplemental withholding tax is 22%. 

The supplemental earnings tax isn’t along with commonplace earnings tax charges. As an alternative, you employ the supplemental fee instead of the usual withholding fee. 

Social Safety and Medicare tax charges don’t change on supplemental wages.

What’s a state supplemental earnings tax?

State earnings tax is a tax on an worker’s wages. The state determines how a lot tax to withhold for earnings tax and the tactic of withholding. Some states could use a progressive methodology the place the tax will increase as wages improve. Others select to make use of a flat tax fee the place all wages obtain the identical tax fee. 

Employers don’t use the supplemental wage tax fee for normal wages, equivalent to hourly or salaried work. As an alternative, employers use state supplemental tax charges when paying wages that complement an worker’s commonplace earnings. Examples of supplemental earnings embrace:

• Bonuses
• Fee pay
• Awards
• Prizes
• Again pay
• Retro pay will increase
• Extra time pay
• Funds for accrued sick go away 
• Paid break day or trip payouts
• Severance pay

Do employers have to make use of a supplemental tax fee?

State legal guidelines could differ, however employers sometimes can resolve to make use of supplemental tax charges. However there’s a catch. In some states, the usage of the supplemental tax fee can depend upon how you pay the worker’s supplemental pay. 

1. Paying supplemental wages individually: For those who pay your worker individually from their commonplace wages (e.g., a second payroll run for fee pay), use the supplemental tax fee for the fee payroll. You should utilize the supplemental tax fee in case you withheld earnings tax from common wages throughout the identical yr or the earlier yr.
2. Paying supplemental wages with commonplace wages: For those who pay an worker their supplemental and common wages collectively in the identical payroll and don’t individually state the wages in your payroll information, don’t use the supplemental tax fee. As an alternative, course of payroll and taxes as common. 

Not all states observe the identical guidelines concerning the way to pay supplemental wages and tax them. Verify along with your state for extra info. 

Do supplemental tax charges change?

Whereas the federal supplemental tax fee has remained 22% for years, state supplemental tax charges could change annually. 

As a result of tax charges could change yearly, do not forget that the pay date determines tax legal responsibility. 

For instance, you resolve to pay an worker for his or her unused trip time on the finish of the yr. However you set the pay date for January 4. As a result of the pay date is within the following yr, you could use the brand new yr’s tax fee for the payout. And the wages will go on the next yr’s Type W-2. 

Supplemental tax charges by state

State supplemental tax charges depend upon a number of components. First, solely states with earnings tax withholding use supplemental tax charges. However, not all of them use supplemental withholding charges even when they’ve state earnings tax. As an alternative, states with out supplemental earnings tax charges proceed utilizing their commonplace earnings tax strategies on supplemental pay. 

States that don’t have earnings tax embrace:

The states with earnings tax and no supplemental tax fee embrace:

States with supplemental earnings tax charges embrace:

2025 State supplemental tax charges [Chart]

Take a look at this chart for supplemental tax charges by state:

Take into account that your locality may need a separate supplemental tax fee. For instance, New York Metropolis’s supplemental tax fee is 4.25%. Verify along with your native tax authority for extra info. 

Contact your state for essentially the most up-to-date tax charges.

Instance of supplemental tax charges

You will have a enterprise in Kansas and pay an worker a bonus of $500. The bonus pay is on a separate payroll from the worker’s wages, so you could use the supplemental tax fee. 

The federal supplemental tax fee is 22%. Kansas has a state supplemental tax fee of 5%. Social Safety stays 6.2%, and Medicare continues to be 1.45%. 

Multiply the $500 bonus by 22% to find out how a lot to withhold for federal earnings tax (FIT):

$500 X 22% = $110

Then, multiply $500 by 5% to calculate the Kansas supplemental tax:

$500 X 5% = $25

Decide Social Safety tax withholding by multiplying the bonus pay by 6.2%:

$500 X 6.2% = $31

Multiply $500 by 1.45% to get Medicare withholding:

$500 X 1.45% = $7.25

Subtract all the tax withholding quantities from the gross bonus pay quantity to find out the worker’s bonus internet pay:

Internet Pay = Gross – FIT – SIT – Social Safety – Medicare 

$500 – $110 – $25 – $31 – $7.25 =$326.75

After calculating the supplemental pay fee, the worker’s internet pay is $326.75. 

This text has been up to date from its unique publication date of January 24, 2022.

This isn’t supposed as authorized recommendation; for extra info, please click on right here.