Federal Income Tax Withholding 2025 Updates

The updates for federal income tax withholding effective January 1, 2025 are:

• The annual additional amount of a nonresident alien employee, who was first paid wages before 2020 and has not submitted a Form W-4 for 2020 or later, increases from $10,300 to $10,700.

• The annual additional amount of a nonresident alien employee, who has submitted a Form W-4 for 2020 or later or was first paid wages in 2020 or later, increases from $14,600 to $15,000.

• The percentage method’s tax brackets were adjusted.
  

Hawaii 2025 Tax Updates

The updates for Hawaii are effective January 1, 2025:

• The tax brackets used in the percentage method were adjusted by increasing the income limits in each bracket.

• An extra lump sum withholding amount of $1,650 was added to the withholding method.

For more information, see the  State of Hawaii Department of Taxation Employer’s Tax Guide: https://files.hawaii.gov/tax/news/pubs/25BkltA.pdf

 

Indiana 2025 Tax Updates

The updates for Indiana are effective January 1, 2025:

• Six counties adjusted their tax rates:

  • Floyd County increases from 1.39% to 1.89%.

  • Gibson County increases from 0.9% to 1.3%. 

  • Jay County increases from 2.45% to 2.5%.

  • Monroe County increases from 2.035% to 2.14%.

  • Rush County increases from 2.1 to 2.15%. 

  • Switzerland County increases from 1.25% to 1.45%.

• The state withholding rate decreases from 3.05% to 3.00%.

 For more information, see the Indiana Department of Revenue Departmental Notice #1: https://www.in.gov/dor/files/dn01.pdf

 

Iowa 2025 Tax Updates

The updates for Iowa are effective January 1, 2025:

• Standard deduction will now depend on the following:

  • The version of the state’s withholding certificate that an employee has filed.

  • The employee’s filing status, previously the amount of state allowances claimed.

• The flat rate is 3.8%.

 

Iowa Withholding Formula for Wages Paid Beginning January 1, 2025

• Step 1: Determine T1

T1 = G - D

(G: Gross taxable wages for the pay period; D: Deduction for the pay period)

• • Step 1A:  For employees who have filed a 2024 or 2025 IA W-4

 

• Step 1B:  For employees whose most recent IA W-4 on file is from 2023 or earlier

 

• Step 2: Determine T2

T2 = T1 x 3.80% (or 0.038)

 

• Step 3: Determine T3

  • Step 3A:  For employees who have filed a 2024 or 2025 IA W-4

T3 = T2 – (W / P)

W: Total allowance amount reported on the employee’s 2024 or 2025 IA W-4

P: Number of pay periods per year

 

• • Step 3B:  For employees whose IA W-4 on file is from 2023 or earlier

T3 = T2 – (W / P)

W: Determine the total allowance amount (W) by multiplying the number of allowances claimed by the employee on the IA W-4 by

$40. For example, if an employee claims 6 total allowances, the employer should use $240 (i.e.,6 x $40) as the total allowance amount.

P: Number of pay periods per year

 

• Step 4: Determine T4, or Withholding Amount per Pay Period

T4 = T3 + A

  (A: Additional withholding requested per pay period on the IA W-4)

 

For more information, see the Iowa Individual Income Tax Withholding Formula: https://revenue.iowa.gov/media/61/download?inline

Massachusetts Tax Updates

The updates for Massachusetts are effective January 1, 2025:

• The inflation-adjusted threshold for the surtax increases from $1,053,750 to $1,083150.

Percentage Methods for Wages Paid from January 1, 2025

From employee’s total wages:

1. Subtract the amount deducted for the U.S. Social Security (FICA), Medicare, Massachusetts, United States or Railroad Retirement systems. The total amount subtracted may not exceed $2,000. When, during the year, the total amount subtracted reaches the equivalent of the $2,000 maximum allowable as a deduction by Massachusetts, discontinue this step.

2. Subtract the total of the exemption factors, i.e., the dollar value of the employee’s exemptions, for the applicable payroll period. If an employee claims “0” exemptions, discontinue this step.

3. After subtracting the amounts specified in steps 1 and 2 above from the employee’s total wages, multiply the result by the number of periods in the year (52 for weekly, 12 for monthly, 24 for semimonthly and 26 or 27 for biweekly) depending on the number of pay periods in the year.

4. Compute the annual tax on the result from step 3. If the result from step 3 is more than $1,083,150*, multiply that portion of the result in excess of $1,083,150 by 9%. Then multiply that portion of the result from step 3 that does not exceed $1,083,150 by 5%. The sum of these amounts is the annual tax.

5. Divide the result from step 4 by the number of pay periods in the year and withhold that amount. 

6. If the employee will file as head of household on their tax return subtract the head of household tax value from the step 5 result. 

Annual head of household tax value: $120.00.

7. If the employee and/or his/her spouse is blind subtract the blindness tax value amount from the result from 5 and 6 (if applicable). 

Annual blindness tax value: $110.00.

Important Note: Do not withhold from employees who claim one or more exemptions if their wages are less than: weekly: $154; biweekly: $308; semimonthly: $333; monthly: $667; daily: $22; or annually: $8,000.

* This is the 2025 inflation-adjusted threshold for the 4% surtax.

 

Michigan Tax Update

Effective January 1, 2025, the value of state allowance increases from $5,600 to $5,800.

For more information, see the 2025 Michigan Income Tax Withholding Guide: 446 Michigan Income Tax Withholding Guide

 

Missouri 2025 Tax Updates

The updates for Missouri are effective January 1, 2025:

• The state’s standard deductions have increased for all filing statuses.

• The state’s supplemental tax rate decreased to 4.7%.

• The withholding formula uses tax rates of zero to 4.7%.

For more information, see the 2025 Missouri Withholding Tax Formula: https://dor.mo.gov/forms/Withholding%20Formula_2025.pdf

 

Montana Tax Update

Effective January 1, 2025, the tax brackets used in the percentage method will be adjusted for all filing statuses.

Montana Withholding Tax Formula

W = A + (B × (G – C))

G = Gross earnings for the payroll period

W = Withholding tax for the payroll period

All amounts to be withheld must be rounded up to the nearest dollar.

For more information, see the Montana Employer and Information Agent Guide: https://mtrevenue.gov/wp-content/uploads/dlm_uploads/2024/12/Montana_Employer_and_Information_Agent_Guide_with_Tax_Tables-1.pdf

 

Nebraska 2025 Tax Updates

The updates for Nebraska are effective January 1, 2025:

• The annual state allowance increases from $2,250 to $2,360.

• The tax brackets decrease from a tax rate range of zero to 6.10% to zero to 5.37%.

To use the percentage method, start with the taxable wage amount for the payroll period. Subtract the value of any income tax withholding allowances. Deduct the result from the taxable wages before using the percentage method tables.  If this calculation is less than 1.5% of the taxable wage amount, adjust the income tax withholding to be at least 50% or more of the income tax withholding for a single employee with one income tax withholding allowance, or for a married employee with two allowances. These amounts meet the minimum income tax withholding requirement and may be used by the employer to determine an acceptable employee’s state income tax withholding amount.

For more information, see the 2025 Nebraska Circular EN: https://revenue.nebraska.gov/sites/default/files/doc/business/Cir_En_2024/2025cir_en_whole.pdf

 

New Mexico 2025 Tax Updates

The updates for New Mexico are effective January 1, 2025:

• The lowest nonzero tax rate used in the formula decreases from 1.7 to 1.5%.

• The tax brackets used in the percentage method were also adjusted.

How to use the Withholding Tax Tables

Determine the amount to withhold from the appropriate tax tables based on the payroll period and the employee’s filing status.

 

For more information, see the Taxation & Revenue New Mexico Withholding Tax Rates: https://www.tax.newmexico.gov/all-nm-taxes/current-historic-tax-rates-overview/withholding-tax-rates/

 

North Carolina 2025 Tax Updates

The updates for North Carolina are effective January 1, 2025:

• The supplemental tax rate decreases from 4.6% to 4.35%.

• The rate used for withholding decreases from 4.6% to 4.35%.

 

 

For more information, see the 2025 Income Tax Withholding Tables and Instructions for Employers: https://www.ncdor.gov/income-tax-withholding-tables-and-instructions-employers/open

 

Ohio 2025 Electronic W2 Update

 

The update for W2 for Electronic Ohio State now requires additional fields in the output file.

 

Rhode Island 2025 Tax Updates

The updates for Rhode Island are effective January 1, 2025:

• The tax brackets used in the percentage method were adjusted for all filing statuses.

• The annual wage threshold above which the value of an allowance becomes zero increases from $274,650 to $283,250.

Income Tax Withholding Percentage Method for the Period Beginning on or After January 1, 2025              

The steps in computing the income tax to be withheld are as follows:      

1. Multiply the amount of one withholding exemption by the number of exemptions and allowances claimed by the employee. 

   • Annual allowance amount: $1,000 

   • Annual allowance amount if annual wages are more than $283,250: $0.00            

2. Subtract the amount from the employee's wages.

3. Determine the amount to be withheld from the rate table.

For more information, see the Rhode Island Employer’s Income Tax Withholding Tables: https://tax.ri.gov/sites/g/files/xkgbur541/files/2024-12/2025%20Withholding%20Tax%20Booklet_0.pdf

 

South Carolina 2025 Tax Updates

The updates for South Carolina are effective January 1, 2025:

• The value of a state allowance increases from $4,610 to $4,860.

• The maximum standard deduction increases from $6,925 to $7,300.

• The tax brackets used in the percentage method were adjusted. The highest rate decreases from 6.4% to 6.2%.

For more information, see the Formula for Computing South Carolina 2025 Withholding Tax: https://dor.sc.gov/forms-site/Forms/WH1603F_2025.pdf

 

Defect 2280138: Performance issues caused increased processing times and freezing when you tried to access or navigate within or away from the Credit Card Reconciliation application, clear an expense charge on the Charges Tab; or import multiple new expense line items.

Defect 2288860: On the Credit Card Reconciliation form, sometimes when you imported a credit card statement, the import process stopped running. 

Defect 2280429: This occurred in dashparts with the project detail dashpart base that was grouped by Employee Name if transaction records from History Loading had employee names that were not saved with the "LastName, FirstName" format. When you displayed the affected dashapart, some employee records were displayed twice with a different name format, i.e.: "FirstName LastName" and "LastName, FirstName".

Defect 2300140: When you used an application to update data in Hubs or Settings and auditing was enabled, you received various error messages, such as "Invalid column name <xxxxx>'' or "Cannot find the object 'dbo.VisionAudit_Update_XX.'"

Defect 2293691: When you added hours to a project, Mobile Time and Expense displayed a spinning wheel and eventually timed out.

Defect 2291215: The Aged Unbilled Revenue report was incorrectly grouping the details by all work breakdown structure levels when only the top WBS level was selected. This caused some incorrect aging amounts.

Defect 2292667: In Reporting, the Project Forecast report took a long time to load or failed to load. In Dashboards » My Dashboards, the report was intermittently not loading.

Defect 2301421: Project Planning reports displayed an incorrect ETC calculation for project plans that did not use calendar periods for expense or consultant planning.

Defect 2284648: This issue applies for employees with tax withholdings for more than two states. When you printed W-2s for these employees, the first W-2 printed correctly with tax withholding amounts for two states, but additional W-2s for tax withholding amounts for the remaining states were not generated.

Defect 2260739: The Templates form continued to display a spinning wheel and did not save the changes that you made in a proposal.

Defect 2288548: This issue occurred when you linked text elements. In Edit Record Layout mode on the Templates form, the Select Project option in the Text Properties pane was not available on the pages of the proposal where projects were present on the linked text elements.

Defect 2284515: This issue applied for saved searches that had multiple rows of search criteria. If you completed the following steps for the saved search, some rows would randomly be removed from the search:

1. You blanked out the value in a search criteria row, and the row was correctly deleted when you saved the search.

2. You opened the saved search again, added more criteria, and saved the search.

Defect 2285684:  When you changed the user status from Inactive to Active, you encountered the 'There is no row at position 0.' error.

Defect 2293446: When you selected Enable Timesheet Assist, it caused blocking locks which prevented timesheets from getting submitted.