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January 5, 2021
2021-0012

2021 state income tax withholding tables, supplemental withholding and highest tax rates

To assist you in reviewing your state income tax withholding rates for 2021, the attached pdf includes a chart of the most recent income tax withholding tables published by states and US territories and the supplemental withholding rate if allowed.

Supplemental withholding rate

Similar to the federal supplemental income tax withholding rate, most states also allow for an optional flat percentage of income tax withholding for wages that are in addition to regular pay. Where allowed, the supplemental rate greatly simplifies income tax withholding calculations on irregular payments such as bonuses, equity compensation and separation pay.

Employers may optionally use a federal flat rate of income tax federal withholding of 22% on supplemental wages up to $1 million for the year; however, a mandatory flat rate of 37% applies to supplemental wages in excess of $1 million. Note that the flat 37% rate applies even if an employee has submitted a federal Form W-4 claiming exemption from federal income tax withholding. (IRS Reg. Section 31.3402(g)-1.)

See Publication 15-T for the 2021 federal income tax withholding tables.

The state supplemental income tax withholding rates currently available for 2021 are shown in the chart in the attached pdf. The chart also shows if the state has a flat tax rate, meaning only one rate of tax applies regardless of the wages paid, or alternatively, the highest marginal withholding rate according to the state's latest computer withholding formula.

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Contact Information
For additional information concerning this Alert, please contact:
 
Workforce Tax Services - Employment Tax Advisory Services
   • Debera Salam (debera.salam@ey.com)
   • Kenneth Hausser (kenneth.hausser@ey.com)
   • Kristie Lowery (kristie.lowery@ey.com)

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