In order to calculate payroll taxes accurately and effectively for your company and employees next year, it is important to understand the new and existing compliance requirements in effect for 2025. Below is an overview of the tax rates, taxable wage bases, and other updates that will impact your payroll processes now that the new year has arrived.
Federal Insurance Contributions Act (FICA)
The wage base will increase from $168,600 to $176,100. Under current law, the tax rate will remain the same at the rate of 6.2% to be paid by both the employer and the employee. The maximum tax will increase from $10,453.20 to $10,918.20.
Medicare
There is no wage base for Medicare. The tax rate is 1.45% to be withheld from the employee and 1.45% to be paid by the employer.
Additional Medicare Tax
An additional Medicare tax is payable over various threshold amounts depending on the filing status reported on the taxpayer’s personal income tax return. This is a withholding tax withheld from the employee only and carries no tax requirement for the employer. For payroll tax purposes, the only relevant item is wages, including taxable benefits paid.
This additional Medicare tax should be deducted from the employee, at the rate of 0.9%, for all wages (and taxable benefits) paid in excess of $200,000.
Federal Unemployment Tax
The current gross FUTA tax rate is 6.0% of taxable wages, to be paid by the employer only. However, an allowed credit effectively reduces the tax rate to a net of 0.6% for wages paid up to the wage limit of $7,000 (for the majority of states). The credit and reduced rate are available by filing the Form 940 for 2024.
In New Jersey, where no credit reduction exists, the effective FUTA tax rate is 0.6% for 2024. In California and New York, there is a credit reduction which will result in an effective FUTA tax rate of 1.5% for 2024. For more information on state-specific credit reductions, refer to Schedule A of Form 940, which will indicate the previously mentioned states subject to credit reduction for the 2024 filing.
NJ Unemployment and Disability
For 2025, the employer base for unemployment and disability increases from $42,300 to $43,300. The employer rate for these taxes is determined by the State and sent in a notice in July. The unemployment base for the employee will increase from $42,300 to $43,300 while the rate will remain the same at .425%. The maximum tax will increase from $179.78 to $184.03.
The base for disability for the employee will increase from $161,400 to $165,400, and the tax rate will increase from .0% to .23%. This will result in the maximum tax increasing from $0.00 to $380.42
NJ Family Leave Insurance
The wage base and rate will both change in 2025. The wage base for the employee will increase from $161,400 to $165,400, and the tax rate will increase from .09% to .33%. This will result in the maximum tax increasing from $145.26 to $545.82.
NJ Payroll Tax Payments
As a reminder, New Jersey will only accept payroll tax payments using an online payment method. There will no longer be an option to call in the tax payments.
