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New Payroll Tax Rates for 2027: Federal and State Updates

6/24/2026

Every January, payroll loads a set of new numbers, and every year some of them are wrong — usually because a figure was carried forward, an add-on assessment was omitted, or a rate notice never arrived and nobody chased it.

This guide separates what actually changes for 2027 from what does not, states when each figure is published, and gives you the load sequence. Where a 2027 figure has not yet been announced at the time of writing, that is stated plainly rather than estimated — several key numbers are released in the autumn preceding the tax year.

What Does Not Change

Start here, because it narrows the work considerably. These are set by statute and do not adjust annually:

Item

Rate

Social Security rate (each side)

6.2%

Medicare rate (each side)

1.45%

Additional Medicare (employee only)

0.9%

Additional Medicare threshold

$200,000 — not indexed

FUTA gross rate

6.0%

FUTA taxable wage base

First $7,000 — not indexed

Maximum FUTA credit

5.4%

Supplemental wage flat rate

22%

Mandatory rate above $1,000,000 supplemental

37%

Backup withholding

24%

Federal minimum wage

$7.25

Next-day deposit trigger

$100,000

Two of those deserve emphasis because their non-indexation surprises people. The $200,000 Additional Medicare threshold has never been indexed, so it captures more employees each year through wage growth alone. And the FUTA wage base of $7,000 has been fixed for decades, which is why FUTA cost is driven almost entirely by headcount turnover rather than by payroll size.

What Changes, and When It Is Published

Figure

Typically announced

Source

Social Security taxable maximum

October

Social Security Administration

Retirement plan limits (401(k), catch-up, IRA)

November

IRS

Health FSA, dependent care, commuter limits

October–November

IRS

HSA limits

Spring of the preceding year

IRS

Withholding tables and Publication 15-T

December–January

IRS

FUTA credit reduction states

Late in the tax year

Department of Labor

State unemployment wage bases

Varies — many in Q4

Each state

Your state unemployment experience rate

Q4 or January, by notice

Each state, individually

State minimum wages

Varies; many effective January 1, some July 1

Each state

State paid family leave contribution rates

Varies, typically Q4

Each state

The practical consequence of that table: you cannot complete the January load in December. Several figures are not final until late in the preceding year, and one — your own unemployment experience rate — arrives by mail or portal notice on the state's schedule, not yours.

Our Payroll Year End: Legislative & Tax Changes session tracks the annual changes, and payroll forms update covers form revisions.

The Social Security Taxable Maximum

The figure that changes most visibly. It is indexed to average wage growth and announced by the Social Security Administration in October for the following year.

For reference, the recent trajectory: $176,100 for 2025 and $184,500 for 2026. The 2027 figure is announced in October 2026 and should be taken from the SSA's announcement rather than projected.

Why it matters operationally: it is the ceiling above which Social Security withholding stops for each employee. Loading a stale figure either stops withholding early — under-collecting for both employee and employer — or continues it past the ceiling, which over-collects and requires refunding. See our Social Security wage base guide.

Retirement Plan Limits

Announced by the IRS in November. For 2026 the elective deferral limit is $24,500, the age 50+ catch-up is $8,000, the ages 60–63 catch-up is $11,250, and the IRA limit is $7,500. The 2027 figures follow the November 2026 announcement.

Three loading complications beyond the headline number:

  • The catch-up limit varies by age band, so a single field cannot represent it
  • The Roth catch-up requirement applies to participants above a prior-year wage threshold, and the population must be recalculated each January from the year just closed
  • The compensation limit used for match calculations is separate and also indexed

See our retirement plan contribution limits guide and 401(k) plan administration handbook.

State Unemployment: Two Separate Figures

This is where the most money is lost to a stale load, because two distinct numbers change and only one is published.

The taxable wage base is set by each state, varies enormously between states, and many are indexed annually to average wages. Published on each state's own schedule, frequently in the fourth quarter.

Your experience rate is assigned to your company individually based on benefits charged against your account relative to taxable payroll. You cannot look it up. The state issues a notice, typically in the fourth quarter or January.

Four things to do with that notice:

  1. Confirm it arrived for every state. Silence is not a rate — contact the state if no notice appears.
  2. Read it in full. Separate add-on assessments — workforce development levies, administrative surcharges, job training funds — are frequently listed alongside the base rate and must be loaded together. Loading only the base rate under-collects all year.
  3. Check the appeal window, which is short. If benefits were charged for a separation you contested or charged in error, this is the moment.
  4. Load both the rate and the wage base, which are independent variables.

FUTA Credit Reduction States

The list of states whose employers face a reduced FUTA credit is confirmed late in the tax year — after most budgets are set and most of the year's payroll has run.

The mechanism: a state that has borrowed from the federal unemployment account and failed to repay across consecutive years triggers a credit reduction for its employers, typically beginning at 0.3% and increasing in 0.3% increments per additional year.

Because the timing is unhelpful, the practical approach is to check the status of every state you operate in before preparing Form 940, and to accrue conservatively during the year for any state that has been borrowing. See our FUTA tax guide.

State Minimum Wages and Exempt Thresholds

Minimum wages change on multiple schedules — many effective January 1, a meaningful number on July 1, and local ordinances frequently on July 1 as well. Several states index annually, meaning a new figure each year with no legislative event to notice.

The downstream effects are what get missed:

  • Exempt salary thresholds in states that set them as a multiple of the state minimum wage rise automatically, and employees can lose exempt status without any change in pay or duties
  • Deduction limits — a deduction that was lawful last year may breach the minimum wage floor after an increase
  • Garnishment exemptions computed from the state minimum wage rise with it
  • Tipped minimum wages and youth or training rates expressed relative to the standard rate move too

Note that the federal exempt salary threshold remains $684 per week ($35,568) following the rescission of the 2024 rule in May 2026 — so for many employers the state threshold is now the binding constraint. See our minimum wage by state guide and DOL salary threshold guide.

Carrying Forward From 2026

Two items introduced for 2026 continue into 2027 and should not be treated as one-year issues.

OBBBA tips and overtime reporting. Beginning with the 2026 tax year, employers must separately report qualified tips and qualified overtime compensation on Form W-2, and the underlying individual deductions run through tax year 2028. Only the premium portion of overtime mandated by Section 7 of the FLSA qualifies. If the earnings-code separation was built for 2026, verify it survived any system upgrade. See our OBBBA payroll forms update session.

The independent contractor rule. Federal rulemaking was in motion through 2026, with the 2024 rule rescinded from enforcement and a replacement proposed. Confirm the current status before relying on any classification analysis. See our employee vs. independent contractor guide.

The January Load Sequence

  • [ ] Social Security taxable maximum — from the October SSA announcement
  • [ ] Retirement plan limits, including catch-up by age band and the Roth catch-up population recalculated from prior-year wages
  • [ ] Health FSA, dependent care, HSA, and commuter limits
  • [ ] Withholding tables from the current Publication 15-T
  • [ ] State unemployment wage bases, per state
  • [ ] State unemployment experience rates plus all add-on assessments, per state, from the rate notice
  • [ ] State minimum wages, including local ordinance rates
  • [ ] State exempt salary thresholds where above federal
  • [ ] State paid family leave and disability contribution rates
  • [ ] New or changed local taxes
  • [ ] Deposit schedule confirmed against the new lookback period
  • [ ] W-4 exempt claims re-solicited before the mid-February expiration
  • [ ] Test a calculation at each limit rather than only checking the field values
  • [ ] Document who loaded what and when

That second-to-last item is the one that catches configuration errors. Run a participant at the deferral limit and confirm the deduction stops; run an employee at the Social Security ceiling and confirm OASDI stops. Field values can look right while the logic behind them is not.

Budgeting Before the Figures Exist

Finance will ask for next year's payroll tax cost in the autumn, before several of the numbers are published. Three approaches, in descending order of defensibility.

Model the mechanism, not the number. Social Security cost is 6.2% of wages up to a ceiling. If you know your wage distribution, you can compute the sensitivity: for a workforce concentrated well below the ceiling, a change in the taxable maximum has almost no effect, while for a workforce with many earners above it, each $1,000 of ceiling increase costs $62 per affected employee. Present the sensitivity rather than a point estimate.

Treat state unemployment as the real variable. It moves more than anything federal, because both the rate and the wage base change, and the rate is company-specific. If you have been contesting separations poorly or have had unusual turnover, expect the rate to rise. This is also the line where a credit reduction state can appear late and add unbudgeted FUTA cost.

Accrue conservatively where a state has been borrowing. A FUTA credit reduction is confirmed too late to react. Accruing at a higher effective rate for affected states during the year is cheaper than a January surprise.

What not to do: project the Social Security taxable maximum from the trend and present it as a figure. It will be close and wrong, and it will be quoted back to you in January.

Frequently Asked Questions

What payroll tax rates change for 2027?

The rates themselves largely do not change — Social Security at 6.2%, Medicare at 1.45%, Additional Medicare at 0.9%, and FUTA at 6.0% with a 5.4% credit are set by statute. What changes are the limits and bases: the Social Security taxable maximum, retirement plan and benefit limits, state unemployment wage bases and experience rates, state minimum wages, and paid family leave contribution rates.

When is the 2027 Social Security wage base announced?

In October 2026, by the Social Security Administration. It is indexed to average wage growth. For reference, the taxable maximum was $176,100 for 2025 and $184,500 for 2026. Take the 2027 figure from the SSA announcement rather than projecting it, since loading a stale or estimated number either stops withholding early or continues it past the ceiling.

Is the Additional Medicare Tax threshold indexed?

No. The $200,000 threshold has never been indexed for inflation, which means wage growth alone brings more employees above it each year. The 0.9% rate is also fixed, and it is employee-only — the employer does not match it.

How do you find your state unemployment tax rate for the new year?

You cannot look it up. States publish only a rate range and a new-employer rate; your actual experience rate is assigned individually and delivered by mail or through the state's employer portal, generally in the fourth quarter or January. Read the notice in full, because separate add-on assessments are frequently listed alongside the base rate and must be loaded with it, and check the appeal window, which is short.

What is the federal exempt salary threshold for 2027?

$684 per week, or $35,568 annually, unless federal rulemaking changes it. The 2024 rule that would have raised it was vacated in litigation and formally rescinded in May 2026, leaving the 2019 levels in effect with no scheduled increase and no automatic indexation. Several states set higher thresholds, some indexed annually, and the higher standard controls.

What should be loaded into payroll before the first payroll of the year?

The Social Security taxable maximum, retirement and benefit plan limits including catch-up amounts by age band, the current withholding tables, state unemployment wage bases and experience rates with all add-on assessments, state minimum wages and exempt thresholds, paid leave contribution rates, and any new local taxes — plus a confirmed deposit schedule based on the new lookback period. Test a calculation at each limit rather than only verifying the field values.

Going Deeper

Several 2027 figures are announced in the autumn of 2026 and were not available when this guide was written. Take every current-year number from the issuing agency — the SSA announcement, IRS Publication 15, and your own state rate notices — rather than from any secondary source.

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