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2024 & 2025 Annual Limits

Payroll deductions and taxes have annual limits that can impact employees' net pay.

Gina Schrandt avatar
Written by Gina Schrandt
Updated over a month ago

Understanding annual limits is crucial for accurate payroll management. Federal, state, and local tax agencies set specific annual limits for payroll deductions and taxes.


Taxes

  • Most taxes come with limits that affect your net pay.

    • Upon reaching these limits within a calendar year, you may see an increase in your take-home pay, or you might reach a threshold requiring additional taxes.

  • The employer and the employee are responsible for paying FICA, which is a combination of Social Security and Medicare taxes.

    • Employers and employees each pay 6.2%. The wage base for 2024 is $168,600. In 2025, the wage base will be updated to $173,200.

  • Both the employer and employee pay Medicare taxes of 1.45% each on all wages paid.

    • Employers and employees pay 1.45% each on all wages. There is an additional 0.9% tax on earnings over $200,000 for employees.

  • Find out more about Social Security limits here.

High wage earners and federal tax limits

  • When hiring an employee who has either reached or is nearing the wage base limits for FICA taxes, it's important to treat them like any other new hire.

  • The Social Security limit is determined based on an employee's work with a single employer.

    • This implies that even if an employee has already reached the annual Social Security limit with a previous employer, both you and the employee must continue withholding Social Security taxes on all wages paid under your employment until they reach the annual limit.


Deduction limits

  • Deductions play a crucial role in calculating an employee’s check.

  • Various deductions, when appropriately configured, can offer benefits to an employee's take-home pay.

  • Pre-tax deductions are typically Section 125 plans for health insurance and deferred compensation for retirement contributions.

Retirement deduction limits

Deduction

2024 Limit

2025 Limit

401(k)

$23,000

$23,500

401(k) Catch-Up (50 and older)

$7,500

$7,500

403(b)

$23,000

$23,500

403(b) Catch-Up (50 and older)

$7,500

$7,500

$23,000

$23,500

$23,000

457(b) Catch-Up (eligibility determined by plan)

$7,500

$7,500

457(b) Special Catch-up (eligibility determined by plan)

Up to $45,000

Up to $30,500

Simple IRA

$16,000

$16,500

Simple IRA Catch-Up (50 and older)

$3,500

$3,500

Roth IRA

$7,000

$7,000

Roth IRA Catch-Up

$1,000

$1,000

  • Learn more about the amount individuals can contribute to their retirement savings in 2025 here.

Health deduction limits

Deduction

2024 Limit

2025 Limit

HSA (self)

$4,150

$4,300

HSA (family)

$8,300

$8,650

HSA Catch-Up (55 and older)

$1,000

$1,000

FSA (self)

$3,200

$3,250

FSA - Dependent care (single, married file jointly)

$5,000

$5,000

FSA - Dependent care (married filing separately)

$2,500

$2,500


Unemployment wage base limit

The unemployment wage base limit represents the taxable wages that employers must compute and contribute towards unemployment taxes. The FUTA wage base limit stands at $7,000. Employers are liable to pay FUTA taxes on the first $7,000 of wages paid to each employee. This wage base limit resets annually on January 1.

  • The state unemployment (SUI) wage base limit varies from state to state, and in some cases, states may adjust the wage base limit on an annual basis.

SUI wage base limits for each state

State

2024 Wage Base Limit

2025 Wage Base Limit

$8,000

$8,000

$48,600

$51,200

$8,000

$8,000

$7,000

$7,000

$7,000

$7,000

$23,800

$27,200

$25,000

$26,500

$10,500

$10,500

$9,000

$9,000

$7,000

$7,000

$9,500

$9,500

$61,800

$64,500

$53,500

$55,900

$13,590

$13,590

$9,500

$9,500

$38,200

$39,400

$14,000

$14,000

$11,400

$11,400

$7,700

$7,700

$12,000

$12,500

$8,500

$8,500

$15,000

$15,000

$9,500

$9,500

$42,000

$44,000

$14,000

$14,000

$10,000

$10,000

$43,000

$44,800

$9,000

$9,000

$20,000, for employers assigned with Tax Category 20.

$40,600

$41,800

$14,000

$14,500

$42,300

$43,700

$31,700

$32,800

$12,500

$13,000

$31,200

$32,500

$43,200

$44,500

$9,000

$9,000

$27,000

$28,200

$52,800

$54,100

$10,000

$10,000

$28,200 (Tier I)

$29,700 (Tier II)

$28,200 (Tier I)

$30,500 (Tier II)

$14,000

$14,500

$15,000

$15,500

$7,000

$7,000

Texas

$9,000

$9,000

$47,000

$48,600

$14,300

$14,900

$8,000

$8,000

$68,500

$70,900

$9,000

$9,000

$14,000

$14,500

$30,900

$31,700


Employee state unemployment wage base limits

In some states, employees contribute directly to state unemployment insurance (SUI). This differs from the typical setup where only employers contribute. Here are more details about these states:

  • Alaska

  • New Jersey

  • Pennsylvania

    • When an employee working in Alaska or New Jersey hits the SUI wage base limit in a calendar year, no further tax deductions will be taken from their paycheck.

State

Wage Base Limit

Rate

Maximum tax

Alaska

$49,700 (2024)

$51,200 (2025)

0.50 (2024)

0.50% (2025)

$248.50 (2024)

$243(2025)

New Jersey

$42,300 (UI, WF 2024)

$43,700 (UI, WF 2025)

$161,400 (TD, FLI)

0.125%

0.09%

$100 (approx)

$145.26

Pennsylvania

Unlimited

0.07%


FAQ

Can an employee request additional withholding specifically for Additional Medicare Tax?

  • No. However, if the employee anticipates owing additional Medicare tax, they may request additional income tax withholding when they complete their W-4.

How do I stop FICA for an employee who has already reached the annual limit?

  • FICA limits are determined based on an employee's work with a single employer. When hiring an employee who has either reached or is nearing the wage base limits for FICA taxes, it's important to treat them like any other new hire.

How do I process a check to max out a 401(k)?

Are there other taxes that have wage limits that may impact an employee’s net pay?

  • Several states have taxes for programs set up for Paid Family Medical Leave (PFML), State Disability Insurance (SDI), or Temporary Disability Insurance (TDI). These taxes can impact the employee’s net pay once they reach the wage base limits.

  • These states include California (SDI), Connecticut (PFML), Massachusetts (PFML), New York (PFL, SDI), Rhode Island (TDI), Washington (PFL), and the District of Columbia (PFL).

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