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2024 Year-End Tax Alert
December 20, 2024
New Payroll Tax Laws Coming into Effect in 2025
As tax year 2024 draws to a close, businesses should be aware that many new regulations go into effect in 2025. The following is a brief description of the federal, state, and local updates that can affect employer payroll taxes.
Federal Updates
The Social Security Administration (SSA) announced the Social Security wage base limit would increase to $176,100 for tax year 2025, an increase of $7,500 from $168,600, in 2024.
The Social Security and Medicare tax rate will remain unchanged. The Social Security tax rate remains at 6.2% for 2025 up to the Social Security wage base limit. The maximum Social Security tax employees and employers will each pay in 2025 is $10,918.20, an increase of $465.00 from tax year 2024.
The Medicare tax rate also remains at 1.45% and applies to all covered earnings for employees and employers (i.e., there’s no wage base limit for Medicare). In addition, if an individual’s earned income exceeds $200,000 ($250,000 for married couples filing jointly), the excess income amount is subject to an additional Medicare tax rate of 0.9%.
The Internal Revenue Service (IRS) announced it’s making strides in processing Employee Retention Credit claims, currently processing approximately 400,000 claims amounting to approximately $10 billion in eligible funds. In October, IRS Commissioner Danny Werfel said, “The IRS is working diligently to process ERC claims as quickly as possible, while guarding against improper payments driven by unscrupulous marketers. In recent weeks, the IRS has made substantial progress in separating eligible claims from the wave of ineligible claims that have come in, and we continue working to refine our models to identify more eligible claims.”
Secure 2.0 Act
The Setting Every Community Up for Retirement Enhancement 2.0 Act of 2022 (SECURE 2.0 Act) issued several key provisions to be released through 2027. Updates to catch-up contributions and auto-enrollment for employees were issued under Sections 109 and 101 respectively for plan years beginning after December 31, 2024.
Super Catch-Up Contributions
Under Section 109, participants attaining ages 60 - 63 in 2025 will be eligible for increased catch-up contributions for their retirement plans. This applies to 401(k), 403(b), and governmental 457(b) plans currently offering catch-up contributions, however this provision is optional for employers. In other words, each plan provider will decide whether to implement this feature in their retirement plans.
The increased catch-up contribution limit is $10,000 or 150% of the standard age 50 and older catch-up contribution limit ($7,500 in 2024), whichever is greater. The IRS has therefore announced the 2025 increased catch-up contribution limit for participants aged 60 - 63 will be $11,250 ($7,500 x 150% = $11,250 vs. $10,000).
To be eligible for this increased catch-up limit participants will be 60, 61, 62, or 63 by December 31, 2025. After participants turn 64, they revert to the standard age 50 and older catch-up contribution ($7,500 in 2025).
Participant Age in 2025 | 2025 Standard Annual Deferral Limit | Catch-up Contribution for 2025 | Total 2025 Annual Contribution Limit |
50-59 or 64 & older | $23,500 | $7,500 | $31,000 |
60-63 | $23,500 | $11,250 | $34,750 |
Auto-Enrollment
The Section 101 provision requires employers to automatically enroll eligible employees in new 401(k) or 403(b) plans with an initial enrollment of 3% but not more than 10%. The contribution increases at the rate of 1% per year until it reaches 10% and a maximum of 15%.
Employees can opt out of the plan if they wish. Small businesses (10 or fewer employees), new businesses (less than three years old), church plans, government plans, and retirement plans created prior to the December 29, 2022, enactment date of Secure 2.0 are exempted from the provision.
Upcoming Payroll Regulations
Notable regulations going into effect during tax year 2025 require employers and employees to stay complaint with state agencies.
Delaware Paid Family and Medical Leave
- The Healthy Delaware Families Act created a statewide paid family and medical leave (PFML) insurance program funded through employer and employee contributions.
- PFML contributions begin on January 1, 2025, and eligible employees are able to access benefits on January 1, 2026.
- Employees are eligible for up to 12 weeks of paid parental leave, 6 weeks of paid family caregiver leave, or 6 weeks of paid medical leave in an application year.
Maine Paid Family and Medical Leave
- Maine’s statewide paid family and medical leave (PFML) insurance program is funded through employer and employee contributions.
- PFML contributions begin on January 1, 2025, and eligible employees are able to access benefits on May 1, 2026.
- Employees are eligible for up to 12 weeks of paid leave annually for family or medical reasons.
Maryland Paid Family and Medical Leave
- Maryland’s statewide paid family and medical leave (PFML) insurance program is funded through employer and employee contributions.
- PFML contributions begin on July 1, 2025, and eligible employees are able to access benefits on July 1, 2026.
- Employees are eligible for up to 12 weeks of paid leave per year for family or medical reasons.
Minnesota Paid Leave
- The first wage detail report is due on October 31, 2024, and is based on wages paid during the third quarter of 2024.
- Payroll premium contributions begin on January 1, 2026.
States with New Withholding Calculation for tax year 2025
Name | Agency Resource |
Arkansas | |
California | |
Colorado | |
Hawaii | |
Iowa | |
Indiana | |
Kentucky | |
Maine | |
Michigan | |
Minnesota | |
Missouri | |
Montana | |
North Carolina | |
Nebraska | |
New Mexico | |
Rhode Island | |
South Carolina | |
West Virginia |
State Minimum Wage Rates Effective January 1st, 2025
Jurisdiction | 2025 Minimum Wage | 2024 Minimum Wage | Jurisdiction | 2025 Minimum Wage | 2024 Minimum Wage |
Alabama | $7.25 | $7.25 | Missouri | $13.75 | $12.30 |
Alaska | $11.91 | $11.73 | Montana | $10.55 | $10.30 |
Arizona | $14.70 | $14.35 | Nebraska | $13.50 | $12.00 |
Arkansas | $11.00 | $11.00 | Nevada | $12.00 | $11.25, $10.25 w/ health benefits |
California | $16.50 | $16.00 | New Hampshire | $7.25 | $7.25 |
Colorado | $14.81 | $14.42 | New Jersey | $15.49 (large employer) & $14.53 (small employer) | $15.13(large employer) & $13.73(small employer) |
Connecticut | $16.35 | $15.69 | New Mexico | $12.00 | $12.00 |
Delaware | $15.00 | $13.25 | New York | $16.50 New York City, Nassau, Suffolk, & Westchester counties; the rest of the state: $15.50 | $16.00 New York City; Nassau, Suffolk and & Westchester. Remainder of New York is $15.00 per hour |
District of Columbia | $17.50 | $17.00 | North Carolina | $7.25 | $7.25 |
Federal | $7.25 | $7.25 | North Dakota | $7.25 | $7.25 |
Florida | $13.00 | $12.00 | Ohio | $10.70 | $10.45 |
Georgia | $7.25 | $7.25 | Oklahoma | $7.25 | $7.25 |
Hawaii | $14.00 | $14.00 | Oregon | 14.70 | $14.20 |
Idaho | $7.25 | $7.25 | Pennsylvania | $7.25 | $7.25 |
Illinois | $14.00 | $13.00 | Rhode Island | $15.00 | $13.00 |
Indiana | $7.25 | $7.25 | South Carolina | $7.25 | $7.25 |
Iowa | $7.25 | $7.25 | South Dakota | $11.50 | $11.20 |
Kansas | $7.25 | $7.25 | Tennessee | $7.25 | $7.25 |
Kentucky | $7.25 | $7.25 | Texas | $7.25 | $7.25 |
Louisiana | $7.25 | $7.25 | Utah | $7.25 | $7.25 |
Maine | $14.65 | $14.15 | Vermont | $14.01 | $13.67 |
Maryland | $15.00 | $15.00 | Virginia | $12.41 | $12.00 |
Massachusetts | $15.00 | $15.00 | Washington | $16.66 | $16.28 |
Michigan | $10.56 | $10.33 | West Virginia | $11.00 | $11.00 |
Minnesota | $11.13 | $10.85 (large employer) & $8.85(small employer) | Wisconsin | $7.25 | $7.25 |
Mississippi | $7.25 | $7.25 | Wyoming | $5.15 | $5.15 |
State Unemployment Insurance Wage Base Limits
Jurisdiction | 2025 Taxable Wage base | 2024 Taxable Wage Base | Jurisdiction | 2025 Taxable Wage base | 2024 Taxable Wage Base |
Alabama | $8,000 | $8,000 | Montana | $45,100 | $43,000 |
Alaska | $51,700 | $49,700 | Nebraska | $9,000 | $9,000 |
Arizona | $8,000 | $8,000 | Nevada | $41,800 | $40,600 |
Arkansas | $7,000 | $7,000 | New Hampshire | $14,000 | $14,000 |
California | $7,000 | $7,000 | New Jersey | $43,300 | $42,300 |
California SDI | No Limit | No Limit | New Jersey TDI EE | $165,400 | $161,400 |
Colorado | $27,200 | $23,800 | New Mexico | $30,100 | $30,100 |
Connecticut | $26,100 | $25,000 | New York | $12,800 | $12,500 |
Delaware | $12,500 | $10,500 | North Carolina | $29,600 | $29,600 |
District of Columbia | $9,000 | $9,000 | North Dakota | $45,100 | $43,800 |
Federal | $176,100 | $168,600 | Ohio | $9,000 | $9,000 |
Florida | $7,000 | $7,000 | Oklahoma | $28,200 | $25,700 |
Georgia | $9,500 | $9,500 | Oregon | $54,300 | $52,800 |
Hawaii | $61,958 | $59,100 | Pennsylvania | $10,000 | $10,000 |
Idaho | $55,300 | $53,500 | Puerto Rico | $7,000 | $7,000 |
Illinois | $13,916 | $13,590 | Rhode Island | $28,200 | $28,200 |
Indiana | $9,500 | $9,500 | South Carolina | $14,000 | $14,000 |
Iowa | $39,500 | $38,200 | South Dakota | $15,000 | $15,000 |
Kansas | $14,000 | $14,000 | Tennessee | $7,000 | $7,000 |
Kentucky | $11,100 | $11,400 | Texas | $9,000 | $9,000 |
Louisiana | $7,700 | $7,700 | Utah | $48,900 | $47,000 |
Maine | $12,000 | $12,000 | Vermont | $14,800 | $14,300 |
Maryland | $8,500 | $8,500 | Virgin Island | $30,800 | $30,800 |
Massachusetts | $15,000 | $15,000 | Virginia | $8,000 | $8,000 |
Michigan | $9,000 | $9,500 | Washington | $72,800 | $68,500 |
Minnesota | $43,000 | $42,000 | West Virginia | $9,500 | $9,521 |
Mississippi | $14,000 | $14,000 | Wisconsin | $14,000 | $14,000 |
Missouri | $9,500 | $10,000 | Wyoming | $34,400 | $30,900 |
Local Minimum Wage Rates Effective January 2025
State, Locality | Minimum Wage |
CA, Belmont | $18.30 |
CA, Burlingame | $17.48 |
CA, Cupertino | $18.20 |
CA, Daly City | $17.07 |
CA, East Palo Alto | $17.45 |
CA, El Cerrito | $18.34 |
CA, Foster City | $17.40 |
CA, Half Moon Bay | $17.47 |
CA, Hayward | Large employer $17.36, |
CA, Los Altos | $18.20 |
CA, Menlo Park | $17.10 |
CA, Mountain View | $19.20 |
CA, Novato | Very large employer $17.27, large employer $17.00, small employer $16.50 |
CA, Oakland | $16.69 |
CA, Palo Alto | $18.20 |
CA, Petaluma | $17.97 |
CA, Redwood City | $18.20 |
CA, Richmond | $17.77 |
CA, San Carlos | $17.32 |
CA, San Diego | $17.25 |
CA, San Jose | $17.95 |
CA, San Mateo | $17.95 |
CA, Santa Clara | $18.20 |
CA, Santa Rosa | $17.87 |
CA, Sonoma | Large employer $18.02, |
CA, South San Francisco | $17.70 |
CA, Sunnyvale | $19.00 |
CA, West Hollywood* | $19.65 |
AZ, Flagstaff | $17.85 |
CO, Boulder County | $16.57 |
CO, Edgewater | $16.52 |
CO, Boulder City | $15.57 |
IL, Cook County | $14.05 |
IL, Cook County (copy) | $15.00 |
MD, Howard County | $16.00 |
ME, Rockland City | $15.50 |
MN, Minneapolis | $15.57 |
NM, Las Cruces | $12.56 |
WA, Bellingham | $17.66 |
WA, Burien | Large employer $21.16, |
WA, Everett | Large employer $20.24, |
WA, King County-Unincorporated Areas | $20.29 King County - areas outside the cities and towns |
WA, SeaTec | $20.17 |
WA, Tukwila | Large employer $21.10, |
WA, Renton | Large employer $20.90, Small employer $18.90 |
Paid Family and Medical Leave Rates Effective 1/1/2025
Jurisdiction | 2025 Rate | Paid By | ||||||||||||||||||
California | 1.2% | Employees | ||||||||||||||||||
Colorado | 0.9% | Employer & Employee
| ||||||||||||||||||
Connecticut | 0.5% | Employees | ||||||||||||||||||
District of Columbia | 0.75% | Employers | ||||||||||||||||||
Massachusetts | 0.88%
Medical:0.70%
Family: 0.18% | The contribution total rate is 0.88 % Employer & Employees 25 or more employees
25 or less employees
| ||||||||||||||||||
New Jersey | 0.33% | Employees | ||||||||||||||||||
New York | 0.388% | Employees | ||||||||||||||||||
Oregon | 1.00% | 1% up to the wage cap
| ||||||||||||||||||
Rhode Island | 1.2% | Employees | ||||||||||||||||||
Washington | 0.92% | Employers & Employees |
Thank you for choosing Paylocity as your Payroll Tax and HCM partner. This information is provided as a courtesy, may change, and is not intended as legal or tax guidance. Employers with questions or concerns outside the scope of a Payroll Service Provider are encouraged to seek the advice of a qualified CPA, Tax Attorney, or Advisor.
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