Accounting / Payroll Tax Rates and Contribution Limits for 2023

Payroll Tax Rates and Contribution Limits for 2023

Below are federal payroll tax rates and benefits contribution limits for 2023.

Social Security tax

In 2023, the Social Security tax rate is 6.2% for employers and employees, unchanged from 2022. The Social Security wage base is $160,200 for employers and employees, increasing from $147,000 in 2022. Self-employed people must pay 12.4% on the first $160,200.

Medicare tax

In 2023, the Medicare tax rate for employers and employees is 1.45% of all wages, unchanged from 2022. Self-employed people must pay 2.9% on all net earnings.

Additional Medicare tax

In 2023, the additional Medicare tax remains unchanged at 0.9%. This tax applies to wages and self-employment income over certain thresholds ($200,000 for single filers and $250,000 for joint filers).

401(k) limits

In 2023, the maximum contributions are as follows:

  • Employee (age 49 or younger) = $22,500, up from $20,500 in 2022.
  • Employee catch-up (age 50 or older) = $7,500, up from $6,500 in 2022.

Employees can contribute up to $15,500 in 2023, up from $14,000 in 2022, to a SIMPLE 401(k) plan.

HSA and HDHP limits

In 2023, the maximum contributions to a health savings account are as follows:

  • Employer and employee = $3,850 (self only), $7,750 (family).
  • Catch-up amount (age 55 or older) = $1,000.

In 2023, the limits for a high-deductible health plan are as follows:

  • Minimum deductibles = $1,500 (self only), $3,000 (family).
  • Maximum out-of-pocket amounts = $7,500 (self only), $15,000 (family).

FSA limits

In 2023, employees can contribute:

  • Up to $3,050, a slight increase from 2022.
  • Up to $5,000 to a dependent care FSA if filing single or jointly, and up to $2,500 if married but filing separately. These are unchanged from 2022.

QSEHRA limits

In 2022, employers with a qualified small employer health reimbursement arrangement can reimburse employees for health care expenses as follows:

  • $5,850 (self only), up slightly from 2022.
  • $11,800 (family), up slightly from 2022.

Commuter benefits limit

In 2023, employees can contribute up to $300 per month for qualified commuter benefits (e.g., mass transit and parking), up from $280 per month in 2022.

Adoption assistance exclusion limit

In 2023, up to $15,950 in employer-sponsored adoption assistance may be excluded from an employee’s gross wages, increasing from $14,890 in 2022.

Remember, these are all federal rates and limits. Be sure to check with the necessary agencies for state and local payroll rates. Also, various limits and additional rules may apply. Work with a financial professional for the details.

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