Significant federal and state payroll, withholding, and mileage updates take effect in 2026. These changes affect wage bases, contribution limits, withholding requirements, mileage reimbursement rates, and state-specific payroll obligations. The following summarizes 2026 updates at the federal level and in Pennsylvania, New Jersey, Delaware, New York, and Florida.
Federal mileage rates
Effective January 1, 2026, the IRS updated standard mileage rates as follows:
| Type of mileage | 2025 rate | 2026 rate |
| Business | $0.70 | $0.725 |
| Medical and relocation | $0.21 | $0.205 |
| Charity | $0.14 | $0.14 |
Additional federal mileage-related provisions:
- Charity mileage rates remain fixed by statute.
- Miscellaneous itemized deductions for unreimbursed employee travel expenses are not permitted.
- Moving expense deductions remain limited to qualifying federal personnel.
Luxury vehicle valuation limit
- The maximum fair market value for vehicles first made available to employees in 2026 increases from $61,200 to $61,700.
- The limit applies to the fleet-average and cents-per-mile valuation methods.
Federal payroll tax rates for 2026
FICA and Medicare
| Tax | Employee rate | Employer rate | Wage base |
| Social Security (OASDI) | 6.2% | 6.2% | $184,500 |
| Medicare | 1.45% | 1.45% | No limit |
| Additional Medicare | 0.9% | N/A | Over $200,000 |
- The maximum Social Security tax increases to $11,439 per employee and employer.
- Additional Medicare tax applies only to employee wages exceeding $200,000.
Federal unemployment tax (FUTA)
- Gross rate: 6.0%
- Net effective rate (with credit): 0.6%
- Wage base: $7,000
- New York and New Jersey are not subject to FUTA credit reductions for 2025 filings.
Federal retirement and benefit limits
| Item | 2026 limit |
| 401(k) elective deferral | $24,500 |
| Catch-up (age 50+) | $8,000 |
| Catch-up (ages 60–63) | $11,250 |
| Total contribution limit | $72,000 |
| HSA – self-only | $4,400 |
| HSA – family | $8,750 |
| Medical FSA | $3,400 |
| Dependent care FSA (MFJ) | $7,500 |
- Beginning in 2026, high earners with prior-year FICA wages over $150,000 must make catch-up 401(k) contributions on a Roth basis.
Pennsylvania payroll and withholding overview
- Personal income tax rate remains a flat 3.07%.
- Employers must continue withholding at 3.07%.
- Local earned income tax rates vary by municipality and school district.
- Remote work performed outside Pennsylvania remains taxable unless employer-mandated.
- Electronic filing enhancements expand myPATH capabilities for amended returns and payment scheduling.
New Jersey payroll and wage updates
Unemployment, disability, and family leave
| Program | 2026 wage base | Employee rate | Maximum tax |
| Unemployment Insurance | $44,800 | 0.425% | $190.40 |
| Temporary Disability | $171,100 | 0.19% | $325.09 |
| Family Leave Insurance | $171,100 | 0.23% | $393.53 |
Additional New Jersey updates:
- Employer unemployment and disability wage base increases to $44,800.
- Maximum weekly benefits:
- Unemployment Insurance: $905
- Temporary Disability and Family Leave: $1,119
- Workers’ Compensation: $1,199
- Payroll tax payments must be submitted electronically.
- State sales tax remains 6.625%.
Minimum wage
- The New Jersey minimum wage increases to $15.92 per hour effective January 1, 2026.
- Different rates continue to apply based on employer size and worker classification.
Delaware payroll snapshot
In 2026, payroll taxes applicable in Delaware include the following federal-based withholding requirements:
Delaware payroll tax rates (2026)
| Tax | Rate | Wage base / threshold | Paid by |
| Social Security (OASDI) | 6.2% | Up to $184,500 | Employee and employer |
| Medicare | 1.45% | No wage base limit | Employee and employer |
| Additional Medicare | 0.9% | Wages over $200,000 | Employee only |
| Federal unemployment tax (FUTA) | 6.0% gross; 0.6% effective | First $7,000 | Employer only |
- FUTA is the sole responsibility of the employer.
- Delaware payroll withholding follows federal wage base and rate thresholds.
New York payroll updates
- The unemployment insurance wage base increases from $12,800 to $17,600.
- Paid Family Leave contribution rate increases to 0.432%, fully funded by employees.
- Annual Paid Family Leave contribution cap: $411.91.
- The Metropolitan Transportation Authority payroll tax applies to wages within the MTA district:
- Rates range from 0.055% to 0.895%.
- No liability if quarterly wages do not exceed $312,500.
Florida payroll overview
- Florida imposes no state income tax.
- No state withholding or disability insurance applies.
- Employers remit reemployment tax only:
- New employer rate: 2.7% on the first $7,000 of wages.
- Experience-rated employers: 0.1% to 5.4%.
- No local payroll taxes are imposed.
Key federal reporting and compliance dates
| Form | Deadline |
| Form W-2 | February 2, 2026 |
| Form 1099-NEC | February 2, 2026 |
| Electronic filing threshold | 10 or more information returns |
Payroll and tax rate changes for 2026 reflect ongoing adjustments to federal wage bases, benefit limits, mileage rates, and state-specific payroll rules. Staying current with these updates is essential for accurate withholding, reporting, and compliance across multiple jurisdictions. Contact your Stephano Slack tax manager or partner at 610-687-1600 or taxinfo@StephanoSlack.com to discuss your situation.
Author Olympia Z. Anagnostou, CPA, is dedicated to helping clients achieve significant tax savings. As a tax manager at Stephano Slack, Olympia works closely with small business owners and individuals to develop customized tax planning strategies designed to help them keep more of their hard-earned money. Contact Olympia at 856-489-0222 ext. 3414 or oanagnostou@stephanoslack.com.
Recent Comments