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Supplemental Tax Charges By State


Usually, paying workers hourly or wage wages is an easy course of. However, what occurs whenever you pay worker commissions or bonuses? It’s possible you’ll want to make use of a supplemental flat tax price 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 overview supplemental earnings tax. Supplemental earnings tax is assessed on supplemental wages (e.g., bonuses, commissions, and so on.). The federal supplemental withholding tax is 22%. 

The supplemental earnings tax will not be along with customary earnings tax charges. As an alternative, you employ the supplemental price rather than the usual withholding price. 

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

What is state supplemental tax? State supplemental tax is an income tax on supplemental wages, including commission, bonuses, back pay, etc. The tax is separate from and in place of state income tax on regular wages.

What’s state earnings tax, and the way is the supplemental earnings tax completely different?

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 might use a progressive methodology the place the tax will increase as wages enhance. Others select to make use of a flat tax price the place all wages obtain the identical tax price. 

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

  • Bonuses
  • Fee pay
  • Awards
  • Prizes
  • Again pay
  • Retro pay will increase
  • Time beyond regulation pay
  • Funds for accrued sick go away 
  • Paid day without work or trip payouts
  • Severance pay

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

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

  1. Paying supplemental wages individually: In the event you pay your worker individually from their customary wages (e.g., a second payroll run for fee pay), use the supplemental tax price for the fee payroll. You need to use the supplemental tax price when you withheld earnings tax from common wages throughout the identical yr or the earlier yr.
  2. Paying supplemental wages with customary wages: In the event you 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 price. As an alternative, course of payroll and taxes as regular. 

Not all states comply with the identical guidelines relating to the best way to pay supplemental wages and tax them. Examine together with your state for extra info. 

Do supplemental tax charges change?

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

As a result of tax charges might change yearly, keep in mind 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 should use the brand new yr’s tax price for the payout. And the wages will go on the next yr’s Type W-2. 

With Patriot Payroll, you may pay supplemental wages with ease!

  • Create cash varieties for supplemental earnings
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Supplemental tax charges by state

State supplemental tax charges depend upon a couple of elements. 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 customary earnings tax strategies. 

States that don’t have earnings tax embrace:

  • Alaska
  • Florida
  • Nevada
  • New Hampshire
  • South Dakota
  • Tennessee
  • Texas 
  • Washington
  • Wyoming

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

  • Arizona
  • Colorado
  • Connecticut
  • Delaware
  • Hawaii
  • Idaho
  • Illinois
  • Indiana
  • Kentucky
  • Louisiana
  • Massachusetts
  • Michigan
  • Mississippi
  • New Jersey
  • Pennsylvania
  • South Carolina
  • Utah
  • Washington, D.C.

States with supplemental earnings tax charges embrace:

  • Alabama
  • Arkansas
  • California
  • Georgia
  • Iowa
  • Kansas
  • Maine
  • Maryland
  • Minnesota
  • Missouri
  • Montana 
  • Nebraska
  • New Mexico
  • New York
  • North Carolina
  • North Dakota
  • Ohio
  • Oklahoma
  • Oregon
  • Rhode Island
  • Vermont
  • Virginia
  • West Virginia
  • Wisconsin

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

State Supplemental Tax Charge (2023)
Alabama 5%
Alaska No state earnings tax
Arizona None
Arkansas 4.7%
California 10.23% on bonus and inventory choices, 6.6% on all else
Colorado None
Connecticut None
Delaware None
Florida No state earnings tax
Georgia Varies by annual wage quantity
Beneath $8,000: 2%
$8,000 – $10,000: 3%
$10,001 – $12,000: 4%
$12,001 – $15,000: 5%
Over $15,000: 5.75%
Hawaii None
Idaho None
Illinois None
Indiana None
Iowa 6%
Kansas 5%
Kentucky None
Louisiana None
Maine 5%
Maryland Use the speed on the backside of the native tax desk; 3.2% for residents of Maryland working in Delaware and different nonreciprocal states
Massachusetts None
Michigan None
Minnesota 6.25%
Mississippi None
Missouri 4.95%
Montana 6%
Nebraska 5%
Nevada No state earnings tax
New Hampshire No state earnings tax
New Jersey None
New Mexico 5.9%
New York 11.7% 
North Carolina 4.85%
North Dakota 1.84%
Ohio 3.5%
Oklahoma 4.75%
Oregon 8%
Pennsylvania None
Rhode Island 5.99%
South Carolina None
South Dakota No state earnings tax
Tennessee No state earnings tax
Texas No state earnings tax
Utah None
Vermont 30% of federal withholding, or 6% for funds underneath a nonqualified deferred compensation plan
Virginia 5.75%
Washington No state earnings tax
Washington, D.C. None
West Virginia Varies by annual gross wage quantity
Beneath $10,000: 2.36%
$10,000 – $25,000:
3.15%
$25,000 – $40,000:
3.54%
$40,000 – $60,000:
4.72%
Over $60,000
: 5.12%
Wisconsin Varies by annual gross wage quantity
Beneath $12,760: 3.54%
$12,760 – $25,520: 4.65%
$25,520 – $280,950: 5.30%
Over $280,950: 7.65%
Wyoming No state earnings tax

Remember that your locality may need a separate supplemental tax price. For instance, New York Metropolis’s supplemental tax price is 4.25%. Examine together with your native tax authority for extra info. 

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

Instance of supplemental tax charges

You might 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 should use the supplemental tax price. 

The federal supplemental tax price is 22%. Kansas has a state supplemental tax price 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:

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

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

After calculating the supplemental pay price, 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 meant as authorized recommendation; for extra info, please click on right here.



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