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On this page you'll find a comprehensive guide to federal income tax, federal payroll tax, and the federal withholding form. You can also select a state to see state tax rates, state withholding forms, and state paycheck calculators.
What are income taxes?
Since the government cannot operate without revenue, an income tax is collected from individuals and businesses. The tax rate is generally based on how much money you earn in a year.
What's the difference between federal and state income tax?
Federal income tax rules are governed by the Internal Revenue Service (IRS) and are consistent across the U.S., whereas each state decides its own income tax rules. To learn about your state's income tax, select your state here.
What's the difference between income tax and payroll tax?
Income taxes refer to federal, state, and local taxes on an employee's income, payable by the employee. Payroll taxes refer to taxes on the salaries and wages of employees, payable by both the employees and employers.
Federal Income TaxesUpdated April 2023
The first income tax in the United States was created in 1861 during the Civil War as a way to fund the war. After the war, the tax became unpopular and was not renewed. It wasn't until 1913 that the Sixteenth Amendment of the Constitution was ratified and gave Congress the ability to collect taxes on income. During World War II, payroll withholding and quarterly tax payments were introduced for the first time, which still exists in our modern income tax withholding system.
Federal individual income tax is the tax collected from individuals by the Internal Revenue Service (IRS) on taxable income. The revenue collected through income tax funds federal programs such as Social Security and Medicare. The federal individual income tax is a progressive tax, meaning that the higher the income is, the higher the tax rate will be. For many Americans, payroll taxes are deducted directly from their paychecks.
Virtually all U.S. citizens are subject to federal withholding, unless someone had no tax liability at all the previous year and they do not expect a tax liability in the current year.
Federal Income Tax Information
The federal income tax has seven tax rates that go up as your income does. In this way, the U.S. tax system is progressive. The more taxable income you have, the higher federal income tax rate you are subject to. The less taxable income you have, the lower the federal income tax rates you are subject to. These rates are 10%, 12%, 22%, 24%, 32%, 35%, 37%.
Taxpayers are not charged a single rate on all of their taxable income. Rather, the government divides your taxable income into brackets, and taxes each bracket of income at its appropriate rate.
Calculate your federal income tax with PaycheckCity Calculators
Payroll Tax Information
FICA stands for the Federal Insurance Contributions Act and is a federal tax that is withheld from every person's paycheck. FICA constitutes of two taxes: Social Security tax and Medicare tax. FICA taxes are only withheld at the federal level.
Each tax rate will vary depending on if you're an employer, an employee, or self-employed.
Social Security Tax
Social Security is a federal insurance program that provides benefits to retired people and those who are unemployed or disabled. Below are the social security tax rates for 2023.
- The employer social security tax is 6.2% on $160,200 of earned income
- The employee social security tax is 6.2% on $160,200 of earned income. The maximum Social Security tax for employees is $9,932.40
- The self-employed social security tax is the combined employer and employee tax of 12.4% on $160,200 of earned income
Medicare is the United States federal government health insurance program for Americans who are 65 years of age and older. These benefits are intended to cover the costs of healthcare associated with advanced age.
Unlike the Social Security tax, there is no annual limit to the Medicare tax. Below are the Medicare tax rates for 2023.
- The employer Medicare tax is 1.45% on all earned income
- The employee Medicare tax is 1.45% on all earned income
- The self-employed Medicare tax is the combined employer and employee tax of 2.9% on all earned income
- There is an additional 0.9% Medicare tax on wages earned after a $200,000 threshold. This means income after reaching $200,000 in a year will have a 2.35% Medicare tax (regular 1.45% Medicare tax + 0.9% additional Medicare tax), called the Additional Medicare Tax
Federal Unemployment Tax Act (FUTA)
FUTA is a tax that only employers pay. It covers unemployment compensation to workers who have lost their jobs.
- Employers pay 6.0%, less a credit for contributions to state unemployment insurance funds, up to 5.4% on $7,000
- Many employers are entitled to the maximum 5.4% credit, with which the FUTA tax rate is 0.6%
- Certain states have lost part or all of this credit. Employers in those states need to check with their labor department to determine the current allowed credit for the state in question
Federal Minimum Wage
The Federal minimum wage is the minimum hourly rate that a non-exempt employee can be paid. The National minimum wage was enacted in 1938 under the Fair Labor Standards Act (FLSA) and was set at $0.25 per hour. Since 1938, Congress has raised the Federal minimum wage twenty-two times. In addition to the Federal minimum wage, state and local jurisdictions can set minimum wage rates. When federal and local minimum wage rates apply employers are required to pay the higher rate.
- Federal Minimum Wage: $7.25 per hour effective July 24, 2009
Federal Withholding Forms
There are several federal withholding forms. The most commonly used federal withholding form is the Form W-4 and tells your employer how much money to withhold from your paycheck for federal income tax. Completing your W-4 accurately helps avoid too much or too little tax being withheld from your paycheck. There is also a federal withholding form for exempt individuals.
Anytime you move or have a major life change (for example: marriage, divorce, birth of a child) always be sure to complete a new W4.
Form W-4Employee's Withholding CertificateResident
Form W-4(SP)Certificado de Retenciones del EmpleadoResident
Form 673Statement For Claiming Exemption From Withholding on Foreign Earned Income Eligible for the Exclusion(s) Provided by Section 911Exempt
Form 8233Exemption From Withholding on Compensation for Independent (and Certain Dependent) Personal Services of a Nonresident Alien IndividualExempt
Federal Paycheck Calculators
Calculate your net pay or take-home pay by entering your pay information and federal W4 information.
Lastest Payroll Insights
State Income Taxes
Some state and local governments have established their own tax rates withholding on wage income. Businesses and individuals living in these states have to pay this income tax, in addition to the federal income tax.
- New Hampshire
- New Jersey
- New Mexico
- New York
- North Carolina
- North Dakota
- Rhode Island
- South Carolina
- South Dakota
- West Virginia
- Washington DC
- Puerto Rico
- American Samoa
- Northern Mariana Islands
- US Virgin Islands
These free resources should not be taken as tax or legal advice. Content provided is intended as general information. Tax regulations and laws change and the impact of laws can vary. Consult a tax advisor, CPA or lawyer for guidance on your specific situation.