2027 payroll tax changes for US small businesses

2027 at a glance

This is what is known on November 11, 2026, from the SSA and IRS. Anything marked "not yet published" we will add when it is out.

Social Security: a $192,300 wage base

On October 14, 2026, the Social Security Administration announced a 3.6% cost-of-living increase for benefits and a 2027 contribution and benefit base of $192,300. That is the most wages on which Social Security tax is charged in 2027.

• An employee earning $192,300 or more pays $11,922.60 of Social Security tax in 2027, and you pay the same. That is $483.60 more each than in 2026.
• Stop withholding Social Security when an employee's 2027 wages reach $192,300. Medicare continues on every dollar.
• The base applies to wages paid in 2027. A December 2026 pay period paid on January 2, 2027 counts toward 2027.
• Self-employed owners pay the 12.4% Social Security part of self-employment tax on earnings up to the same $192,300.

Income tax withholding and Pub 15-T

The IRS released the 2027 inflation adjustments on November 5, 2026 (Revenue Procedure 2026-35). The rates stay at 10% to 37%, the bracket thresholds rise, and the standard deduction goes to $16,600 for single filers, $33,200 for joint filers and $24,925 for heads of household.

Payroll doesn't use those tables directly. The IRS turns them into withholding tables in Publication 15-T. As of November 11, 2026 the 2027 edition has not been published, not even as a draft; a new year's edition usually arrives in December. Until it does, nobody can tell you the exact 2027 withholding on a paycheck, and any calculator that claims to is estimating. The IRS has posted an early draft of the 2027 Publication 15 (the Employer's Tax Guide).

What you can expect: with higher brackets and a higher standard deduction, most employees will see slightly less federal income tax withheld on the same pay in January.

The 2027 Form W-4

The IRS has posted a draft 2027 Form W-4. It keeps the 2026 layout, including the Step 4(b) worksheet where employees can account for the deductions for qualified tips (up to $25,000) and qualified overtime (up to $12,500, or $25,000 for joint filers). It is a draft, and the dollar amounts in its worksheets may change before the final form.

• Existing employees don't need a new W-4 for 2027. Keep using the one on file.
• Employees who claimed exemption for 2026 must give you a new W-4 by Tuesday, February 16, 2027 (February 15 is Presidents' Day). If they don't, withhold as if they were single with no other entries.
• On the 2027 form, an exemption claimed for 2027 lasts until February 15, 2028.
• Tips and overtime still need tracking: the deductions run from 2025 through 2028, and the 2026 W-2 reports them with box 12 codes TP and TT. See what changed in US payroll for 2026.

FUTA and the 2026 credit reductions

FUTA stays at 6.0% on each employee's first $7,000 of wages, reduced to 0.6% when you pay state unemployment tax in full and on time. In states that still owe the federal government for unemployment loans, the credit is cut and you pay more for the whole year's wages, with the extra due with Form 940.

• For 2025 (paid with the Form 940 filed in early 2026): California at 1.2% and the US Virgin Islands at 4.5%.
• For 2026: the Department of Labor's potential list, issued in January 2026, named California at 1.5% (possibly more if an extra add-on applied and was not waived) and the US Virgin Islands at 4.8%. The final list is set after November 10, 2026; we will update this page when it is confirmed.
• For a California employer at 1.5%, the net FUTA rate for 2026 would be 2.1%: $147 per employee who earns at least $7,000, instead of $42.
• The extra is reported on Schedule A (Form 940) and paid with the 2026 Form 940, due Monday, February 1, 2027 (February 10 if all FUTA deposits were on time). See Form 941 vs Form 940.

Other numbers that move

• State payroll. State income tax tables, unemployment wage bases and rates, and minimum wages change on their own schedules, many on January 1. Your state unemployment agency sends your 2027 rate notice, usually around the turn of the year; enter it as soon as it arrives.
• 1099 threshold: $2,100 for payments made in 2027. The $2,000 threshold still applies to the 2026 forms you file in early 2027.
• Information return penalties for returns due in 2028 go up to $70, $140 and $360 per return.
• Supplemental wages (bonuses paid separately) are withheld at a flat 22%, and 37% above $1 million; the 2027 Pub 15 will confirm this for 2027.

What to do before January

1. Finish 2026 first: run the payroll year-end checklist before the last pay date of the year.
2. List the employees likely to pass $192,300 in 2027, so Social Security stops at the right point.
3. Collect new W-4s from anyone exempt for 2026 by February 16, 2027.
4. Watch for the 2027 Publication 15-T and your state's new tables, and check the first January paychecks against them.
5. Put the new state unemployment rate into payroll when the notice arrives.

AcboBooks currently runs the 2026 Publication 15-T tables with the $184,500 wage base, Additional Medicare and FUTA, and its Form 940 figures include the 2025 credit reduction rates. We will add the 2027 federal tables after the IRS publishes them; until then, check the 2026 Schedule A rates against the final Labor Department list before you file. The paycheck calculator shows a 2026 paycheck with the same code.

Frequently asked questions