Payroll Taxes by State: 2026 Guide for Small Businesses

You're running payroll across state lines and every state has different rules. California wants SDI contributions. Washington has paid leave premiums. New York just raised their wage base again. And somehow, you're supposed to track all of it while actually running your business.

Payroll taxes by state aren't just different, they also change every year. Miss a rate update or miscalculate a local tax, and you're looking at penalties that can cost thousands. Get your filing frequency wrong, and the fees pile up fast.

This guide breaks down 2026 payroll tax rates for all 50 states. You'll get the current SUTA ranges, wage bases, and paid leave programs. We'll cover what changed this year, which cities add local taxes on top, and how to stay compliant without becoming a tax expert. Everything you need to run payroll confidently in one place.

Quick look: 2026 payroll taxes by state

• 50 states, 50 different tax rules. SUTA rates range from under 1% to over 10% depending where you operate. Wage bases cap anywhere from $7,000 to $68,500. Paid leave programs exist in 13 states, with more launching soon.
• Federal taxes stay consistent. Social Security, Medicare, and FUTA apply the same way everywhere. Your state and local obligations are what complicate things.
• 2026 brought changes. Twelve states increased wage bases. Three states adjusted paid leave rates. Colorado's FAMLI program is in full swing. If you ran payroll in 2025, your 2026 calculations are different.
• Local taxes complicate it further. NYC charges MCTMT. San Francisco has health service requirements. Portland added a supportive housing tax. These stack on top of state obligations.
• Multistate payroll multiplies the complexity. An employee working remotely in California means following California rules, even if your business is in Texas. Track where people work, not just where your business is registered.

What are payroll taxes?

Payroll taxes are the fees you pay as an employer. Some come from employee paychecks, some come straight from your pocket. Either way, you're responsible for calculating, withholding, and sending them to the right government agencies on time.

Here's the split:

• Withholding taxes come out of employee wages—federal income tax, state income tax (in most states), Social Security, and Medicare. You take these from paychecks and send them to tax agencies on your team's behalf.
• Employer taxes you pay directly. FUTA for federal unemployment. SUTA for state unemployment. In some states, you also pay for disability insurance, paid family leave, or workforce training programs. These don't touch employee paychecks—they come from your business account.

The types you'll encounter:

• FUTA (Federal Unemployment Tax Act): Federal unemployment insurance you pay to cover laid-off workers. Rate is 6% on the first $7,000 per employee, but you usually pay just 0.6% if you pay state unemployment taxes on time.
• SUTA (State Unemployment Tax Act): State unemployment insurance. Rates vary wildly based on your location, industry, and claims history. New employers often pay a standard rate until the state calculates your experience rating.
• Paid family leave: Mandatory in 13 states as of 2026, with more considering it. Employees get paid time off for family care or personal medical issues. Some states split the cost between employer and employee.
• SDI (State Disability Insurance): California, Hawaii, New Jersey, New York, Rhode Island, and Puerto Rico require this. Covers short-term disability for non-work injuries or illness.

Your job is knowing which taxes apply in your state, calculating them correctly, and filing on schedule. Miss a deadline or miscalculate a rate, and penalties add up fast.

2026 federal payroll tax rates

Federal payroll taxes work the same in all 50 states. Social Security is 6.2% for employers and employees on wages up to $176,100. Medicare is 1.45% each on all wages, with an additional 0.9% employee-only tax on high earners. FUTA is 6% on the first $7,000 per employee, but most employers pay just 0.6% after the state unemployment tax credit.

2026 state-by-state payroll tax breakdown

Every state sets its own SUTA rate range, wage base, and paid leave rules. Some states have no income tax. Some add local taxes on top. Here's what you need to know for 2026.

States with no income tax

Nine states don't tax regular income: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. Employees in these states won't have state income tax deducted from their paychecks.

You still handle federal payroll taxes and state unemployment insurance. Here's what matters for each:

• Alaska: SUTA rates range from 1% to 5.4% on the first $47,100 in wages.
• Florida: SUTA rates range from 0.1% to 5.4% on the first $7,000 in wages. New employers pay 2.7%.
• Nevada: SUTA rates range from 0.25% to 5.4% on the first $40,600 in wages.
• New Hampshire: No state income tax, but taxes on dividend and interest income apply. SUTA rates range from 0.1% to 7% on the first $14,000 in wages.
• South Dakota: SUTA rates range from 0% to 9.45% on the first $15,000 in wages.
• Tennessee: No state income tax as of 2021. SUTA rates range from 0.01% to 10% on the first $7,000 in wages.
• Texas: SUTA rates range from 0.23% to 6.23% on the first $9,000 in wages. New employers pay 2.7%.
• Washington: SUTA rates vary by industry and experience. Paid Family and Medical Leave premiums are 0.74% in 2026. Employers with 50+ employees pay a portion.
• Wyoming: SUTA rates range from 0% to 8.5% on the first $30,900 in wages.

States with flat income tax rates

These states apply the same tax rate to all income levels. You withhold state income tax at the uniform rate, plus handle unemployment insurance and federal payroll taxes.

• Colorado: 4.40% flat income tax. SUTA rates range from 0.75% to 10.39% on the first $23,800 in wages. FAMLI paid leave premiums are 0.9% in 2026, split between employer and employee.
• Illinois: 4.95% flat income tax. SUTA rates range from 0.85% to 8.65% on the first $13,271 in wages.
• Indiana: 3.05% flat income tax, plus county tax rates that vary. SUTA rates range from 0.5% to 9.4% on the first $9,500 in wages.
• Kentucky: 4.0% flat income tax. SUTA rates range from 0.3% to 9% on the first $11,100 in wages.
• Massachusetts: 5.0% flat income tax. Paid Family and Medical Leave contributions are 0.88% in 2026, split between employer and employee. SUTA rates range from 0.94% to 14.37% on the first $15,000 in wages.
• Michigan: 4.25% flat income tax. SUTA rates range from 0.06% to 10.3% on the first $9,500 in wages.
• North Carolina: 4.50% flat income tax. SUTA rates range from 0.06% to 5.76% on the first $31,400 in wages.
• Pennsylvania: 3.07% flat income tax, plus local taxes in many municipalities. SUTA rates range from 1.2905% to 10.7314% on the first $10,000 in wages.
• Utah: 4.55% flat income tax. SUTA rates range from 0.3% to 7.3% on the first $47,000 in wages.

States with progressive income tax

These states use tax brackets—rates increase as income rises. You'll need to update withholding tables regularly to match current brackets. All these states also require unemployment insurance and federal payroll tax compliance.

• California: Progressive rates from 1% to 13.3%. SUTA rates range from 1.5% to 6.2% on the first $7,000 in wages. SDI is 1.3% in 2026 on all wages (employee-paid). Paid Family Leave is included in SDI rate. Employment Training Tax is 0.1% on the first $7,000 (employer-paid).
• Connecticut: Progressive rates from 3% to 6.99%. Paid Family and Medical Leave contributions are 0.5% in 2026. SUTA rates range from 1.9% to 6.8% on the first $25,000 in wages.
• New Jersey: Progressive rates from 1.4% to 10.75%. TDI is 0.19% and FLI is 0.23% on the first $171,100 in 2026 (employee-paid). SUTA rates range from 0.6% to 6.4% on the first $44,800 in wages.
• New York: Progressive rates from 4% to 10.9%. Paid Family Leave is 0.432% on the first $95,348.76 in 2026 (employee-paid). SDI is approximately 0.5% (employee-paid). SUTA rates vary by employer experience on the first $13,000 in wages.
• Oregon: Progressive rates from 4.75% to 9.9%. Paid Leave Oregon premiums are 1% in 2026, with employers covering 40% and employees covering 60%. Statewide transit tax is 0.2% in 2026 on wages up to $184,500.
• Rhode Island: Progressive rates from 3.75% to 5.99%. Temporary Disability Insurance is 1.1% on the first $100,000 in 2026 (employee-paid). SUTA rates range from 0.9% to 9.4% on the first $30,800 in wages.

For complete progressive tax rates and brackets in Alabama, Arizona, Arkansas, Delaware, Georgia, Hawaii, Idaho, Iowa, Kansas, Louisiana, Maine, Maryland, Minnesota, Mississippi, Missouri, Montana, Nebraska, New Mexico, North Dakota, Ohio, Oklahoma, South Carolina, Vermont, Virginia, Washington D.C., West Virginia, and Wisconsin, consult each state's Department of Revenue website. All require SUTA and federal payroll tax compliance.

State payroll tax changes to know in 2026

A dozen states changed their rules for 2026. Here's what actually affects your payroll.

Major wage base increases:

Twelve states raised their SUTA wage bases for 2026, meaning you'll pay unemployment tax on more of each employee's wages. Oregon jumped from $54,300 to $56,700—a 4.4% increase. Wyoming went from $32,400 to $33,800. Washington's wage base increased from $72,800 to $78,200. If you're running payroll in multiple states, these increases add up fast.

Paid leave rate changes:

California's SDI rate increased from 1.2% to 1.3% for 2026. That's an extra dollar per thousand in employee withholding. New York's Paid Family Leave employee contribution jumped from 0.388% to 0.432%, with the maximum annual contribution rising to $411.91.

New Jersey actually decreased rates—TDI dropped from 0.23% to 0.19%, and FLI fell from 0.33% to 0.23%. Good news if you're processing New Jersey payroll.

New programs and expansions:

Rhode Island's TDI rate dropped from 1.3% to 1.1%, but the wage base jumped from $89,200 to $100,000. You're withholding less per dollar, but on more dollars total.

Oregon's statewide transit tax doubled from 0.1% to 0.2% starting January 1, 2026. Applies to all wages up to $184,500.

What stayed the same:

Connecticut held steady at 0.5% for Paid Family Leave. Oregon's Paid Leave rate remained at 1%. California's SUTA schedule stayed on F+ (1.5% to 6.2%) with no rate relief expected while the state pays down its federal UI loan.

The bottom line: If you didn't update your payroll system on January 1, you're either over-withholding or under-withholding right now. Check your state's rates and make sure your calculations match 2026 requirements.

Understanding local payroll taxes

State taxes weren't complicated enough. Some cities add their own.

What are local payroll taxes?

Local payroll taxes are city or county-level taxes on top of state and federal requirements. They fund specific municipal services like transit, healthcare programs, or emergency services. New York City, San Francisco, Denver, and Portland all have their own payroll tax requirements.

Examples that affect your payroll

New York City: Metropolitan Commuter Transportation Mobility Tax (MCTMT) ranges from 0.11% to 0.60% on quarterly payroll over $312,500 within the MCTMTD. Employers pay this, not employees.

San Francisco: Gross Receipts Tax includes payroll expense component for apportionment. Businesses with over $50 million in gross receipts also face a 1.5% administrative office payroll tax.

Denver: Occupational Privilege Tax is $5.75 per month for each employee who works in Denver. Contact Denver's Treasury Division for current requirements.

Portland: Metro Supportive Housing Services tax is 1% on high earners plus business taxes. Check Portland Revenue Division for current rates and thresholds.

Where to check for local rules

Most cities publish payroll tax information on their revenue department websites. Start with your city's official government site and search for "employer taxes" or "payroll taxes." Your state's employer tax division can also point you to local requirements.

Remote work complicates everything

If your employee moved from Texas to San Francisco mid-year, your tax obligations changed overnight. Track where people actually work, not just where they live or where your business is registered. California taxes based on work location, which means remote work in California triggers California tax obligations even if your business operates elsewhere.

Some cities require registration and monthly or quarterly filing even for a single employee working remotely in their jurisdiction. Miss the registration deadline and you'll face penalties on top of back taxes owed.

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Payroll taxes by state FAQs

What states have no income tax or payroll tax?

Nine states have no income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. Your employees won't have state income tax withheld from their paychecks in these states. But you're not off the hook for payroll taxes entirely. You still owe SUTA (state unemployment tax) in all nine states, and some have additional payroll obligations. Washington requires Paid Family and Medical Leave premiums. New Hampshire taxes dividend and interest income. No state is completely tax-free when it comes to employer payroll obligations.

What's the difference between SUTA and FUTA?

SUTA is state unemployment tax. Rates and wage bases vary by state, and your rate depends on your industry and claims history. New employers typically start at a standard rate until the state calculates your experience rating. FUTA is federal unemployment tax—it's the same everywhere. The rate is 6% on the first $7,000 per employee, but most employers pay just 0.6% because they get a 5.4% credit for paying SUTA on time. SUTA funds your state's unemployment program. FUTA funds the federal unemployment system and helps states that run out of money.

How do I handle taxes for remote or hybrid workers?

Tax based on where they work, not where your business is located. An employee working remotely in California means you follow California tax rules, even if your business is in Texas. This includes income tax withholding, SDI contributions, and paid family leave. Some cities add local taxes on top—San Francisco and New York City both have employer obligations that kick in if someone works there. Track each employee's work location and register for tax accounts in every state where you have workers. Remote work creates multistate compliance obligations fast.

How Homebase makes payroll tax compliance easy

Stop crossing your fingers every time you run payroll. Stop worrying whether you got the tax calculation right. Stop Googling state tax rates at midnight.

Homebase handles the tax complexity so you don't have to become an expert in 50 different state systems.

Tax calculations you can trust

We track all 50 state rates, wage bases, and local taxes. You don't lift a calculator. California's SDI increase? Oregon's transit tax change? Wyoming's new wage base? We update automatically the day rates change. You just run payroll—the system calculates federal withholding, state income tax, SUTA, paid leave premiums, and local obligations based on where each employee works.

Automatic filing and remittance

We file and remit your state and local taxes. You don't mail a check or log into a government portal. No more quarterly deadline anxiety or late-night filing sessions. Homebase submits your returns and payments on schedule, every time. You get confirmation when it's done.

Compliance alerts when things change

Rate changes in your state? We update automatically and notify you. New wage bases? Already configured. Paid leave program launches? We've got it covered before the deadline hits. You stay compliant without tracking legislative updates or subscribing to state tax newsletters.

Year-end forms that handle themselves

W-2s and 1099s generate and distribute themselves. Your team gets their tax forms on time, filed correctly, without you formatting a single box or stuffing an envelope. We handle new hire reporting and year-end submissions so you don't spend January stressing about deadlines.

Built by people who get it

97% of customers say Homebase payroll is easy to use. Three out of 4 say it makes payroll faster. Customers save 30+ minutes every payroll run on average. Setup takes under 25 minutes, and payroll specialists are available for troubleshooting when you need help. We handle the transfer and you don't touch a single spreadsheet.

More than just compliance

Give your team early wage access at no cost to you with Pay Any Day. Help them handle unexpected expenses without payday loans or overdraft fees. It's a benefit that costs you nothing and keeps your team financially stable.

Run payroll without tax anxiety. Try Homebase for free. We'll handle setup in under 25 minutes