January 4, 2023
2023 state supplemental, flat tax and highest income tax withholding rates with hyperlinks to the latest withholding tables/instructions (as of January 9, 2023)
January 9, 2023: Updates were made to North Carolina and Wisconsin.
To assist you in reviewing your state and US territory income tax withholding rates for 2023, the chart provided in the attached PDF contains hyperlinks to the most recent income tax withholding formulas/tables published by the states and US territories, information concerning their respective highest income tax withholding rates (based on their percentage method of withholding) or flat tax withholding rates, and their supplemental withholding rates, if applicable.
Supplemental withholding rate
Like the federal supplemental income tax withholding rate, some jurisdictions with a graduated income tax 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, nonqualified deferred compensation, equity compensation and separation pay.
For federal purposes, employers may opt to use a flat tax rate of 22% on supplemental wages up to
$1 million for the year; however, a mandatory flat tax rate of 37% applies to supplemental wages over $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. (Treas. Reg. Section 31.3402(g)1; see IRSPublication15-T for the 2023 federal income tax withholding tables.)
State legislative landscape
Last year, legislation and ballot initiatives were adopted that retroactively changed personal income tax rates in several states. Early indications show that this trend is likely to continue in 2023.
Updates to our chart will be available in our 2023 Employment tax rates and limits report, anticipated to be available in late January 2023, and updated throughout the year. You can find the report, once available, here.
Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor
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