With every new year, there come new payroll tax changes. In 2024, employers will need to revise their policies and procedures accordingly. Whether complex or easy, it’s each company’s responsibility to adhere to the law and make the necessary changes in payroll processing.
If you process payroll in-house, you’ll need to make careful note of the updates and program your systems to remain compliant. If you use a payroll processing service or other third-party provider, like an accountant or bookkeeper, you’ll want to make sure they’re updated on the law. Whoever processes your payroll, your company is ultimately responsible for any errors or omissions, so it’s important to get it right the first time and on time for the new year. Here are the currently known updates for 2024.
1. Social Security (OASDI) Taxable Maximum Increases for 2024
The Social Security Administration announced a change to the maximum amount of earnings that will be subject to Social Security tax for 2024. Up from a cap of $160,000 for 2023, in 2024 the maximum SSA taxable earnings for 2024 will be 5.2% higher at $168,000. With the Social Security tax rate at 6.2%, the maximum Social Security tax an employee can pay in 2024 is $10,453.20 (6.2% x $168,600).
This taxable income, also known as the wage base, is being increased to align with the national wage index: it’s not based on the consumer price index as many believe. The 12.4% overall tax rate, with workers and businesses splitting the cost, remains unchanged for 2024. The rate change can see top earner’s contributions cap at over $20,000 per year.
Medicare taxes will not change for the coming year, with a withholding rate of 1.45% for employees and employers. For workers whose taxable income is more than $200,000 per year, the 0.9% additional Medicare tax still applies.
2. Federal Income Tax Bracket Changes for 2024
To align with persistent inflation, the IRS has revised tax brackets for 2024 to help workers retain more of their earnings. Across all categories, changes may allow employees to see a small decrease in their payroll taxes.
For single filers:
| Tax Rate | 2023 Taxable Income Bracket | 2024 Taxable Income Bracket |
| 10% | $0 to $11,000 | $0 to $11,600 |
| 12% | $11,000 to $44,725 | $11,601 to $47,150 |
| 22% | $44,725 to $95,375 | $47,151 to $100,525 |
| 24% | $95,375 to $182,100 | $100,526 to $191,950 |
| 32% | $182,100 to $231,250 | $191,951 to $243,725 |
| 35% | $231,250 to $578,125 | $243,726 to $609,350 |
| 37% | Above $578,125 | Above $609,350 |
For married filing jointly filers:
| Tax Rate | 2023 Taxable Income Bracket | 2024 Taxable Income Bracket |
| 10% | $0 to $22,000 | $0 to $23,200 |
| 12% | $22,001 to $89,450 | $23,201 to $94,300 |
| 22% | $89,451 to $190,750 | $94,301 to $201,050 |
| 24% | $190,751 to $364,200 | $201,051 to $383,900 |
| 32% | $364,201 to $462,500 | $383,901 to $487,450 |
| 35% | $462,501 to $693,750 | $487,451 to $731,200 |
| 37% | Above $693,750 | Above $731,200 |
Standard deductions will also increase by $750 for single filers and by $1,500 for joint filers for 2024:
| Filing Status | 2023 Standard Deduction | 2024 Standard Deduction |
| Single | $0 to $22,000 | $0 to $23,200 |
| Married Filing Jointly | $22,001 to $89,450 | $23,201 to $94,300 |
| Heads of Household | $89,451 to $190,750 | $94,301 to $201,050 |
3. 401(k) Contribution Limit Increases Slightly for 2024
The IRS has announced a small increase in contribution allowances for 401(k), 403(b) and 457 plans. The maximum contribution level will rise by $500 to $23,000 for 2024.
For defined contribution plans, the maximum annual contribution limit will increase to $69,000. The catch-up contribution limit, for participants 50 and older, will remain unchanged in 2024 at $7,500.
4. HSA and HRA Changes for 2024
Health savings accounts (HSA) and Health Reimbursement Arrangements (HRA) will also see changes for 2024. The IRS announced inflation adjustments in their Rev. Proc. 2023-23 document. Contribution limits for these accounts that allow employees to defer taxes on medical spending are being increased.
The annual HSA contribution limits for 2024 are:
- $4,150 for self-only coverage ($3,850 in 2023)
- $8,300 for family coverage ($7,750 in 2023)
For 2024 all qualifying high-deductible health plans must have an annual deductible of at least $1,600 for self-only coverage ($1,500 in 2023) or $3,200 for family coverage ($3,000 in 2023).
Annual out-of-pocket expenses, including co-pays, deductibles, and other amounts that do not include premium payments, cannot exceed $8,050 for self-only coverage ($7,500 in 2023) or $16,100 for family coverage ($15,000 in 2023).
For plan years that begin in 2024, the maximum amount that may be made newly available in the plan year for excepted benefit HRAs is $2,100 ($1,950 in 2023).
Ensure You’ve Got these Payroll Tax Changes Covered
Navigating numerous payroll tax changes can be challenging. We’ve prepared a checklist that summarizes all the payroll tax changes for 2024 in a very concise way.
Our 2024 Payroll Tax Changes Checklist not only covers the major updates but also provides actionable steps you can start taking today to ensure you account for the changes. Download and share with your team today!
