2027 payroll tax changes: what employers must update on January 1

The 2027 payroll tax changes are smaller than the 2026 round, which rewrote the W-2 and the W-4, but there are more of them than most owners expect, and they arrive on three different dates: the figures that take effect on January 1, the forms due February 1, and the limits the IRS has not announced yet. This guide lists each one with its source and status as of November 12, 2026, then gives you a month-by-month checklist you can copy into your own calendar. For how the taxes themselves work, start with our guides to what FICA is and employer payroll taxes; this page covers only what changes.

Federal payroll taxes on January 1, 2027

Only one federal payroll tax figure moves for 2027. The Social Security Administration (SSA) announced on October 14, 2026, in the same notice as the 3.6% cost-of-living adjustment, that the Social Security wage base 2027 is $192,300, up from $184,500. The rate stays at 6.2% each for employee and employer, so the maximum Social Security tax an employee pays rises from $11,439.00 to $11,922.60, and your matching share rises by the same $483.60 for anyone who earns above the old base.

For a small employer the wage base change is usually invisible. At Northfield Coffee in Austin, the highest-paid hourly employee, Emily Carter at $19.00 an hour, earns roughly $40,000 a year, so Social Security tax comes out of every one of her checks in both years and nothing changes. The base matters for a general manager or owner-employee paid above $184,500: in 2027, 6.2% keeps coming out of their pay for an extra $7,800 of wages before it stops, and you match it.

Two things to check even if nobody is near the base. First, payroll software that tracks year-to-date wages must reset to zero on the first 2027 paycheck and use the new $192,300 cap; if you run payroll on a spreadsheet, change the cap by hand. Second, the Social Security tax is calculated on the pay date, not the days worked. Wages for work done in late December 2026 but paid in January 2027 are 2027 wages, count toward the 2027 base and appear on the 2027 W-2.

FUTA does not change, but one line on your 2026 Form 940 might. Employers in a credit reduction state lose part of the 5.4% credit because the state has carried a federal unemployment loan for two or more years. The U.S. Department of Labor's potential list for 2026 names California at 1.5% and the U.S. Virgin Islands at 4.8%. The final determination is made after November 10, 2026, and as of November 12 the Department's FUTA credit reduction page still showed the potential list (last updated September 11, 2026), and the IRS had not posted the final 2026 Schedule A. If California stays on the list at 1.5%, each California employee costs an extra $105 in FUTA (1.5% × $7,000) on the 940 you file by February 1, 2027. Watch both pages before you file.

2027 401(k), HSA, FSA and withholding limits

Benefit limits reach payroll through deductions, so each one needs a new cap in your system before the first 2027 paycheck. Here is where each stands.

401(k) contribution limit 2027: not yet announced

As of November 12, 2026, the IRS has not published the 2027 retirement plan limits. Its contribution limit pages still end at 2026: an employee deferral limit of $24,500, an age-50 catch-up of $8,000, a higher catch-up of $11,250 for employees who turn 60 to 63 during the year, an IRA limit of $7,500, a SIMPLE deferral limit of $17,000 and a total annual additions limit of $72,000. The IRS announced the 2026 figures on November 13, 2025 (IR-2025-111, Notice 2025-67), so the 2027 notice should arrive in the second half of November 2026. Several actuarial firms project a $25,500 deferral limit and an $8,500 catch-up for 2027 from the inflation formula; treat those as projections until the IRS notice is out, and do not load them into payroll. We will update this page when it is.

One retirement change for 2027 is already final. Under the SECURE 2.0 Act, catch-up contributions by employees whose prior-year Social Security wages from you exceeded an indexed threshold ($145,000 as written in the law) must be made as Roth contributions. The IRS final regulations, issued in September 2025, generally apply to contributions in taxable years beginning after December 31, 2026, after a good-faith period in 2026. Ask your plan provider for the exact wage threshold and the list of affected employees before the first 2027 payroll.

HSA, FSA and commuter limits: final

If your open enrollment already closed with 2026 caps on the forms, employees who elected the old maximum can be allowed to raise their FSA or HSA election for 2027; check your plan document for how. HSA limits apply per calendar year and combine employer and employee contributions, so an employer seed of $500 reduces what the employee can put in.

Federal income tax withholding for 2027

The IRS released the tax year 2027 inflation adjustments on November 5, 2026 (Rev. Proc. 2026-35). The standard deduction rises to $16,600 for single filers, $33,200 for married filing jointly and $24,925 for heads of household, and the bracket thresholds move with it. Those figures feed the 2027 Publication 15-T withholding tables, which the IRS normally posts in December. Load the 2027 tables before your first January pay date, not after; using 2026 tables for a few weeks is legal but means every employee is slightly over-withheld. Our guide to the W-4 form explains what the IRS has posted for 2027 so far.

Forms and deadlines in early 2027

January 31, 2027 is a Sunday, so the year-end filing deadline moves to Monday, February 1, 2027. Everything below is a 2026 form filed in 2027 unless stated.

The new W-2 codes on 2026 forms

The W-2 you issue in January 2027 is the first with the boxes added for the 2025 tax law's tips and overtime deductions. Three new box 12 codes and one new box: TT for total qualified overtime compensation (only the premium half of time-and-a-half, not the whole overtime check), TP for cash tips reported to the employer, TA for employer contributions to a Trump account, and box 14b for the Treasury tipped occupation code that goes with code TP. Emily Carter's six overtime hours in the November 1 to 14 pay period at $19.00 an hour produce $57.00 of code TT wages (6 × $19.00 × 0.5), and Northfield's payroll has to have been tracking that premium separately all year to fill the box. Our W-2 deadline guide walks through every box and the penalties for late or wrong forms, and 1099 vs W-2 covers who gets which form.

Form W-4 for 2027

The IRS has posted a draft 2027 Form W-4 marked “do not file”. It keeps the 2026 layout, including the tips, overtime, vehicle loan interest and senior deduction lines, but its dollar amounts are blank. Keep using the 2026 form for new hires until the final 2027 version appears, and never require existing employees to file a new W-4 just because the year changed.

The 2027 standard mileage rate

Not announced as of November 12, 2026. The business rate is 76 cents a mile for travel from July 1, 2026 through December 31, 2026 (it was 72.5 cents for January to June). The IRS usually publishes the next year's rate in a notice in the second half of December. Until then, write your reimbursement policy as “the current IRS standard business rate” rather than a number; our IRS mileage rate guide has the history and a reimbursement calculator.

State minimum wage increases on January 1, 2027

Sixteen states raise their minimum wage on January 1, 2027, most through inflation formulas announced in September and October. The table repeats the figures in our minimum wage by state guide, which also lists tipped wages and the states that adjust in July. New York has no January 2027 increase, and the federal rate stays at $7.25.

Later in 2027: Alaska goes to $15.00 and the District of Columbia and Oregon adjust on July 1, 2027. Florida's next inflation adjustment is January 1, 2028, and Texas stays at $7.25, so Northfield Coffee's Austin pay rates are a business decision, not a legal one. City rates are a separate layer: Seattle, Denver, several California cities and others set their own January 1 figures above the state rate, so check the city where the work is done.

The rate change itself is one field in payroll. The work is around it: raise every employee who is at or below the new floor effective the first hour worked on January 1, even when that hour falls in the middle of a pay period, so one pay period can carry two rates. Update tipped cash wages and tip credits where the state allows them, post the new state poster, and recheck the youth and training wages. In an hourly team, the increase also lifts the regular rate for overtime: an employee moving from $13.73 to $15.00 in Michigan goes from $20.60 to $22.50 an hour for overtime.

Exempt salary thresholds that move with the minimum wage

Under federal law the salary floor for the executive, administrative and professional exemptions is still $684 a week ($35,568 a year), the figure the Department of Labor has used since the 2024 increase was vacated. Several states tie their own floor to the minimum wage, which means it rises on January 1, 2027 too. The two largest:

• California: two times the state minimum wage for full-time work. At $17.40 that is $1,392 a week, or $72,384 a year ($6,032 a month), per the Department of Industrial Relations. Anyone classified as exempt who earns less on January 1 must get a raise or be reclassified as non-exempt and paid overtime. See our California minimum wage guide.
• Washington: the multiplier depends on headcount. Employers with 1 to 50 employees stay at 2.25 times the minimum wage, which at $17.73 is $1,595.70 a week ($82,976.40 a year). Employers with 51 or more employees step up to 2.5 times, $1,773.00 a week ($92,196.00 a year), per the Department of Labor & Industries release of September 30, 2026. Details are in our Washington minimum wage guide.

New York, Colorado, Alaska and Maine also publish salary thresholds that change on January 1; take the 2027 figure from the state agency's notice. Remember that salary alone never makes someone exempt. The job duties test applies in every state, and a salaried shift lead who mostly runs a register is non-exempt whatever the salary says. Our exempt vs non-exempt guide covers both tests and what to do when a raise crosses a threshold.

State paid leave and disability contributions for 2027

No state benefits program starts paying out on January 1, 2027, but one state starts collecting, and several that already collect have new rates. These are payroll taxes in everything but name, so they belong on the same checklist.

• Maryland (new): contributions to the Family and Medical Leave Insurance (FAMLI) program begin on wages paid from January 1, 2027. The Maryland Department of Labor set the 2027 rate at 0.9% of wages up to the Social Security wage base, split evenly between employee and employer. Employers with fewer than 15 employees owe no employer share and remit only the employee half. The first quarterly wage report and payment are due in April 2027; benefits start in January 2028, after the legislature's 2025 delay. Employers who wanted a private plan had to file a declaration of intent by November 15, 2026.
• Washington: the Paid Family and Medical Leave premium rises from 1.13% to 1.2% of gross wages up to the Social Security wage base on January 1, 2027, per the Employment Security Department. Employees pay up to 70.7% of the premium; employers with 50 or more employees pay at least 29.3%.
• California: the State Disability Insurance withholding rate rises from 1.3% to 1.4% of all wages for 2027, with no wage cap, per the Employment Development Department. The UI wage base stays at $7,000 and the Employment Training Tax at 0.1%.
• New York: the 2027 Paid Family Leave employee contribution is 0.452% of gross wages, capped at $451.81 for the year, and the maximum weekly benefit rises to $1,287.91, per New York's Paid Family Leave program.
• Colorado, Massachusetts, Oregon, Minnesota, Delaware, Connecticut and New Jersey recalculate their rates or wage caps each fall. We could not confirm every 2027 figure from the agencies at the time of writing, so take the percentage and the employer share from your state program's 2027 notice rather than a third-party table.

If you have employees in more than one state, each contribution follows where the work is performed, which is one more reason to keep time records by location. Our guide to employer payroll taxes explains how these programs split costs between employer and employee.

Month-by-month checklist: December 2026 to February 2027

Copy this list of 2027 payroll tax changes into your calendar or task tool and replace the bracketed items. It assumes a biweekly payroll like Northfield Coffee's; weekly and semimonthly employers hit the same deadlines with different pay dates. Two calendar facts shape the January work: January 1, 2027 is a Friday and a bank holiday, so a Friday payday that lands on it usually moves to Thursday, December 31, 2026, which makes those wages 2026 wages for tax purposes. And because 2027 has 53 Fridays, employers who pay every other Friday starting January 1 get 27 paydays, and weekly Friday payers get 53. Our 2027 payroll calendar maps every pay date, and how many pay periods are in a year explains what a 27-period year does to salaries and deductions.

Three of these 2027 payroll tax changes catch more small employers than any tax rate. The first is the moved payday: if December 31, 2026 becomes a pay date, that check belongs on the 2026 W-2 and may give you 27 pay dates in 2026, which changes the year's totals for anyone with a fixed-dollar deduction. The second is the e-file threshold: 10 information returns of any type combined, W-2s and 1099s together, means paper is no longer allowed. The third is the credit reduction: a California employer who files Form 940 in January without checking the final Schedule A will underpay by $105 per employee if the 1.5% reduction stands. Everything else on the list is a value to type once.

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