Payroll Taxes by State: What Employers and Employees Need to Know

Every worker in the United States is subject to payroll taxes — but the total amount depends heavily on where you work. Federal payroll taxes like Social Security and Medicare apply to everyone, while state-level obligations vary dramatically. Some states layer on disability insurance, paid family leave, transit taxes, and other deductions that can add up to several extra percentage points. Whether you're an employer figuring out your obligations or an employee trying to understand your paystub, this guide breaks down how payroll taxes work at both the federal and state level.

Federal Payroll Taxes

Federal payroll taxes apply to every worker in the country regardless of state. These are split between employer and employee, and they fund Social Security, Medicare, and federal unemployment insurance.

FICA: Social Security and Medicare

FICA (Federal Insurance Contributions Act) taxes are the largest federal payroll obligation. Both the employer and employee pay equal shares:

• Social Security: 6.2% each (12.4% total) on wages up to the 2026 wage base of $176,100. Once an employee's earnings exceed this threshold for the year, Social Security withholding stops.
• Medicare: 1.45% each (2.9% total) on all wages with no cap.
• Additional Medicare Tax: Employees pay an extra 0.9% on wages exceeding $200,000 in a calendar year. The employer does not match this portion.

For a worker earning $80,000, the combined employee-side FICA comes to $6,120 — $4,960 for Social Security and $1,160 for Medicare.

FUTA: Federal Unemployment Tax

The Federal Unemployment Tax Act (FUTA) is paid entirely by the employer. The rate is 6.0% on the first $7,000 of each employee's annual wages. However, employers who pay state unemployment taxes on time receive a credit of up to 5.4%, reducing the effective FUTA rate to 0.6% — or a maximum of $42 per employee per year.

State Payroll Taxes Overview

Beyond federal taxes, states impose their own payroll obligations. The most common categories include:

• State income tax withholding — The largest state payroll deduction for most workers. Rates range from flat taxes under 3% to progressive brackets exceeding 13%.
• State Unemployment Insurance (SUI) — Paid by employers (and in a few states, employees) to fund unemployment benefits. Rates vary by employer experience and state.
• State Disability Insurance (SDI/TDI) — Mandatory in a handful of states to provide short-term disability benefits.
• Paid Family and Medical Leave (PFML) — A growing number of states require contributions to fund paid leave programs.
• Local and transit taxes — Some states authorize cities or transit districts to levy additional payroll taxes.

The table below highlights the states with the most notable payroll tax obligations beyond standard income tax withholding.

States With No Income Tax

Nine states impose no income tax on wages: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. If you work in one of these states, you won't see a state income tax line on your paystub.

However, no income tax doesn't mean no payroll obligations. Employers in every state must pay FUTA and state unemployment insurance. And several no-income-tax states have other payroll deductions:

• Washington requires contributions to its Paid Family and Medical Leave program (0.74% of wages, split between employer and employee) and the WA Cares Fund long-term care program (0.58%, employee-paid).
• Nevada imposes a Modified Business Tax on employers, calculated on wages above a quarterly threshold.
• Alaska has some of the higher SUI rate ranges among no-tax states.

Even in states with no income tax, workers still see federal income tax, Social Security, and Medicare withheld from every paycheck.

States With Additional Payroll Obligations

Several states go beyond standard income tax and unemployment insurance, requiring contributions to disability, paid leave, and other programs. These show up as separate deduction lines on your paystub.

California

California has one of the most complex payroll tax systems. In addition to having the highest top income tax rate in the country (13.3%), employees pay into the State Disability Insurance (SDI) program at 1.1% of wages. SDI funds both short-term disability benefits and the state's Paid Family Leave (PFL) program. Starting in 2025, California removed the SDI taxable wage ceiling, meaning high earners now pay SDI on all wages.

New York

New York layers multiple payroll obligations on top of its progressive income tax (4.0% - 10.9%). Employees contribute to:

• Disability Benefits (DBL) — A small employee contribution (typically $0.60/week, capped at $31.20/year)
• Paid Family Leave (PFL) — 0.373% of the employee's gross wages, up to the statewide average weekly wage cap
• NYC local income tax — Residents of New York City pay an additional 3.078% to 3.876% in city income tax, which appears as a separate line on paystubs

If you work in New York and live in NYC, your paystub will have more deduction lines than most workers in the country.

New Jersey

New Jersey is one of the few states where employees contribute to state unemployment insurance directly. Beyond a progressive income tax (1.4% - 10.75%), employees pay into:

• Temporary Disability Insurance (TDI) — Funds short-term disability benefits
• Family Leave Insurance (FLI) — 0.09% of wages up to the taxable wage base, funding paid family leave
• Workforce Development Partnership (WDP) — 0.14% of wages, funding job training programs
• Unemployment Insurance — Employees pay a portion alongside the employer

Washington

Despite having no state income tax, Washington has built out several payroll-funded programs:

• Paid Family and Medical Leave (PFML) — 0.74% of wages, with costs split roughly 72% employee / 28% employer
• WA Cares Fund (Long-Term Care) — 0.58% of wages, paid entirely by the employee. This funds long-term services and supports for eligible residents.

These deductions mean Washington workers see more lines on their paystub than you might expect from a no-income-tax state.

Hawaii

Hawaii requires employers to do more than withhold taxes. Two programs stand out:

• Temporary Disability Insurance (TDI) — Employee-paid at approximately 0.5% of wages (capped), providing wage replacement during non-work disabilities
• Prepaid Health Care Act — Employers must provide health insurance to any employee working 20+ hours per week. This is an employer mandate, not a payroll tax, but it significantly affects total compensation costs.

Oregon

Oregon layers multiple payroll deductions on top of its income tax (4.75% - 9.9%):

• Statewide Transit Tax — 0.10% of wages, paid by the employee. This applies statewide, not just in Portland's metro area.
• Paid Leave Oregon — 1.0% of wages, split 60% employee / 40% employer. Funds the state's paid family and medical leave program.

Both of these appear as separate lines on Oregon paystubs.

Massachusetts

Massachusetts imposes a 5.0% flat income tax, plus a 4% surtax on income above $1,000,000 (indexed for inflation). Beyond income tax:

• Paid Family and Medical Leave (PFML) — Total contribution of approximately 0.88% of wages, split between employer and employee. The employee pays the medical leave portion and part of the family leave portion, while the employer covers the rest.

How Payroll Taxes Appear on Your Paystub

Your paystub is a record of every tax and deduction taken from your paycheck. Understanding what each line means helps you verify accuracy and catch errors. Here's what payroll-related deductions typically look like:

• Federal Income Tax (or "Fed Tax," "FIT") — Your federal withholding based on your W-4
• Social Security (or "OASDI," "SS Tax") — 6.2% of gross pay up to the annual wage base
• Medicare (or "Med Tax") — 1.45% of gross pay, plus 0.9% Additional Medicare Tax if applicable
• State Income Tax (or "SIT," abbreviated by state like "CA SIT" or "NY SIT") — Your state withholding
• SDI / TDI / DBL — State disability insurance, if your state requires it
• PFL / FLI / PFML — Paid family or medical leave contributions
• SUI — State unemployment insurance, if your state requires employee contributions (like NJ or AK)
• Local Tax — City or county taxes (NYC, Philadelphia, Detroit, and others)

If a line on your paystub doesn't look right, compare it against the rates listed above for your state. For a full walkthrough of every paystub section, see our guide on how to read a paystub.

Key Takeaways

1. Federal payroll taxes (Social Security at 6.2%, Medicare at 1.45%) apply to every worker. The Social Security wage base for 2026 is $176,100.
2. Employers pay FUTA at an effective rate of 0.6% on the first $7,000 of each employee's wages.
3. State payroll obligations vary widely — from zero additional taxes in states like Texas and Florida to multiple layered programs in California, New York, and New Jersey.
4. Nine states have no income tax, but several of them (especially Washington) still impose payroll-funded programs that appear on your paystub.
5. State disability insurance (SDI/TDI) is mandatory in California, New York, New Jersey, Rhode Island, and Hawaii.
6. Paid family and medical leave programs are expanding — states like Washington, Oregon, Colorado, Connecticut, and Massachusetts now require payroll contributions.
7. Local taxes in cities like New York City, Philadelphia, and Detroit add additional deductions beyond state taxes.

Frequently Asked Questions

Related Guides