The Internal Revenue Service (IRS) has updated the income-tax withholding tables for 2018 to reflect changes made by the new tax law. The updated tables reflect the new rates for employers to use during the 2018 tax year.
Employers are instructed to use the 2018 withholding tables as soon as possible, but not later than February 15, 2018. Until employers make the switch, they’re instructed to use the 2017 withholding tables. That’s why your early 2018 paychecks may look a little different than you expect – by the end of February, your check should reflect the changes (the exact timing depends on your employer and your pay period/frequency).
Withholding tables are used by payroll service providers and employers to determine how much tax to withhold from your paycheck, given each your wages, marital status, and the number of withholding allowances. The new tables reflect the increase in the standard deduction, repeal of personal exemptions and changes in tax rates and brackets.
Most taxpayers are paid weekly, bi-weekly, or semimonthly. Here’s what those tables look like:
If you are on another pay schedule, for more information, or if you need larger print, you can check out Notice 1036 (downloads as a PDF).
The new withholding tables are designed to work with the forms W-4 that employees already have on file with their employers. That means that you don’t have to do anything else at this time – but keep reading.
According to the IRS, the new tables should result in the correct amount of tax withholding: ideally, not too much and not too little. However, it’s possible that with the new tables, you may need to change your form W-4. But exercise patience: The IRS is revising form W-4, though a release date is not yet available. I’ll be updating my form W-4 guide (you can find it here) as soon as the new form W-4 is available.
The IRS is also revising the withholding tax calculator on IRS.gov. It should be available by the end of February.
Remember that in addition to income tax withholding, your pay is also subject to withholding for FICA (Social Security and Medicare) taxes. For 2018, the employee portion of Social Security tax is 6.2% with a taxable wage base of $128,400 (wages over that amount are not subject to Social Security tax) while the employee portion of Medicare tax is 1.45% with no wage base limit (all wages are subject to Medicare tax). There is an additional Medicare surtax (.9%) tacked on to wages which exceed $200,000, or $250,000 for married taxpayers.