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Tax Changes Implemented Pay Period 2026-03: Federal, PR, AR, CA, CO, HI, IL, IN, IA, KY, LA, ME, MA, MN, MS, MO, MT, NE, NM, NY, NC, ND, OH, OK, RI, SC, VT, and Localities in IN, KY, OH, and NY

DATE: Thursday, January 29, 2026

Please share this information with all impacted employees.

The following tax changes were implemented in Pay Period 2026-03. As a result, employees may see a change in their current tax withholdings. Please note that these tax changes are not applied retroactively and reconciliation may be needed when impacted employees file their tax returns.

Federal Taxes

U.S. Federal Social Security (OASDI) and Medicare Wage Base:

  • The Social Security wage base has increased from $176,100 to $184,500.
  • There is no limit on Medicare wages.
  • Social Security and Medicare tax rates remain unchanged.

U.S. Federal 401 (k) Wage Limits:

  • The 401 (k) maximum exclusion limit has increased from $23,500 to $24,500.
  • The catch-up contribution for employees who will be age 50 or older in 2026 is increasing from $7,500 to $8,000.
  • The super catch-up contribution for individuals who will be age 60, 61, 62, or 63 in 2026 remains $11,250.

U.S. Federal Income Tax:

  • The standard and high-income tax tables for all marital statuses have changed.
  • Withholding Based on a Pre-2020 Form W-4: The annual amount to be added to a nonresident alien's taxable wages prior to calculating the withholding has increased from $10,700 to $11,800.
  • Withholding Based on a 2020 Form W-4: The annual amount to be added to a nonresident alien's taxable wages prior to calculating the withholding has increased from $15,000 to $16,100.

U.S. Territory Taxes

Puerto Rico 401 (k) Wage Limits:

  • The pre-tax contribution limit for Puerto Rico-Only Qualified Plans will remain $15,000. Note: This amount is subject to change, and any updates will be communicated in a future Tax Changes message.
  • The pre-tax contribution limit for Dual-Qualified Plans (qualified as both a U.S. and Puerto Rico plan) has increased from $23,500 to $24,500.
  • The pre-tax contribution limit for U.S. federal employees has increased from $23,500 to $24,500.
    The catch-up contribution limit for Puerto Rico plans that cover U.S. federal government employees is the same as the U.S. federal 401 (k) catch-up limit.
  • The catch-up contribution limit for Puerto Rico-Only Plans and Dual-Qualified Plans will remain $1,500. Note: This amount is subject to change, and any updates will be communicated in a future Tax Changes message.
  • Datamart Query: Tax State = RQ

State Taxes 

The following state income tax withholding formulas have changed effective January 1, 2026.

Arkansas State Income Tax Withholding:

  • The standard deduction amount has increased from $2,410 to $2,470.
  • The standard tax table has been changed.
  • The tax credit formula for employees who qualify for the low-income tax tables has been modified.
  • Datamart Query: Tax State = 05

California State Income Tax Withholding:

  • The low-income exemption amount for Married with 0 or 1 exemption and Single has increased from $18,368 to $18,896.
  • The low-income exemption amount for Married with 2 or more exemptions and Head of Household has increased from $36,736 to $37,791.
  • The standard deduction for Married with 0 or 1 exemption and Single has increased from $5,540 to $5,706.
  • The standard deduction for Married with 2 or more exemptions and Head of Household has increased from $11,080 to $11,412.
  • The Single, Married, and Head of Household tax tables have changed.
  • The annual personal exemption credit has increased from $163.90 to $168.30.
  • Datamart Query: Tax State = 06

Colorado State Income Tax Withholding:

  • The annual standard deduction for employees who do not complete Form DR 0004, Line 2 and who file as Married Filing Jointly or Qualifying Widow(er) has increased from $10,000 to $11,000.
  • The annual standard deduction for employees who do not complete Form DR 0004, Line 2 and who file as anything other than Married Filing Jointly or Qualifying Widow(er) has changed from $5,000 to $5,500.
  • Datamart Query: Tax State = 08

Hawaii State Income Tax Withholding:

  • A new extra lump sum withholding allowance has increased from $1,650 to $4,350.
  • Datamart Query: Tax State = 15

Illinois State Income Tax Withholding:

  • The annual exemption amount for the basic allowances claimed for the taxpayer, spouse, and other dependents has increased from $2,850 to $2,925.
  • Datamart Query: Tax State = 17

Indiana State Income Tax Withholding:

  • The state tax rate has changed from 3.00% to 2.95%.
  • Datamart Query: Tax State = 18

Iowa State Income Tax Withholding:

  • The standard deduction amount for employees whose marital status is Single or Married Filing Jointly, Spouse Works has increased from $12,000 to $13,000.
  • The standard deduction amount for employees whose marital status is Head of Household has increased from $18,050 to $19,500.
  • The standard deduction amount for employees whose marital status is Married or Married Filing Jointly, Spouse Does Not Work has increased from $24,050 to $26,000.
  • Datamart Query: Tax State = 19

Kentucky State Income Tax Withholding:

  • The annual standard deduction has increased from $3,270 to $3,360.
  • The tax rate has changed from 4.0% to 3.5%.
  • Datamart Query: Tax State = 21

Louisiana State Income Tax Withholding:

  • For Single filers who claim the standard deduction, the amount has increased from $12,500 to $12,875.
  • For Married filers who claim one‑half of the standard deduction, the amount has increased from $12,500 to $12,875.
  • For Married filers who claim the full standard deduction, the amount has increased from $25,000 to $25,750.
  • Datamart Query: Tax State = 22

Maine State Income Tax Withholding:

  • The annual exemption per allowance claimed has increased from $5,150 to $5,300.
  • The Single and Married standard deduction tables have changed.
  • The Single and Married tax tables have changed.
  • Datamart Query: Tax State = 23

Massachusetts State Income Tax Withholding:

  • The tax table for regular wages has changed.
  • The estimated annual wage threshold at which supplemental wages become subject to the higher tax rate has increased from $1,083,150 to $1,107,750.
  • The supplemental Special Formula has been updated to align with state withholding requirements for employees with estimated annual wages below $1,107,750. Previously, the tax was calculated using a flat 5% times the supplemental wage. It is now calculated at 5% after subtracting the applicable exemption amounts.
  • Datamart Query: Tax State = 25

Minnesota State Income Tax Withholding:

  • The annual amount per exemption has increased from $5,200 to $5,300.
  • The Single and Married withholding tables have changed.
  • Datamart Query: Tax State = 27

Mississippi State Income Tax Withholding:

  • The tax tables have changed.
  • Datamart Query: Tax State = 28

Missouri State Income Tax Withholding:

  • The standard deduction amount for employees claiming Single, Married Filing Separate, and Married and Spouse Works has increased from $15,000 to $16,100.
  • The standard deduction amount for employees claiming Married and Spouse Does Not Work has increased from $30,000 to $32,200.
  • The standard deduction amount for employees claiming Head of Household has increased from $22,500 to $24,150.
  • The income tax table has changed.
  • Datamart Query: Tax State = 29

Montana State Income Tax Withholding:

  • The tax tables have changed.
  • Datamart Query: Tax State = 30

Nebraska State Income Tax Withholding:

  • The flat tax rate for supplemental wages has changed from 5.0% to 3.5%.
  • The annual amount per withholding allowance has increased from $2,360 to $2,440.
  • The Single, Head of Household, and Married tax tables have changed.
  • The calculation for required minimum withholding has been updated. The calculation will no longer apply when the tax calculated based on claimed deductions is at least 1.5% of annualized gross wages. This change may affect employees with higher incomes.
  • Datamart Query: Tax State = 31

New Mexico State Income Tax Withholding:

  • The Single, Married, and Head of Household tax tables have changed.
  • Datamart Query: Tax State = 35

New York State Income Tax Withholding:

  • The Single and Married tax tables have changed.
  • Datamart Query: Tax State = 36

North Carolina State Income Tax Withholding:

  • The flat tax rate on supplemental wages has changed from 4.35% to 4.09%.
  • The wage tax rate for all filers has changed from 4.35% to 4.09%.
  • The adjustment related to the minimum additional withholding amount required for nonresident aliens has changed.
  • Datamart Query: Tax State = 37

North Dakota State Income Tax Withholding:

  • The tax tables have changed.
  • Datamart Query: Tax State = 38

Ohio State Income Tax Withholding:

  • The flat tax rate on supplemental wages has changed from 3.5% to 2.75%.
  • Datamart Query: Tax State = 39

Oklahoma State Income Tax Withholding:

  • The flat tax rate for supplemental wages has changed from 4.75% to 4.50%.
  • The Single and Married tax tables have changed.
  • Datamart Query: Tax State = 40

Rhode Island State Income Tax Withholding:

  • The annualized wage threshold for the annual exemption amount has increased from $283,250 to $290,800.
  • The tax table has changed.
  • Datamart Query: Tax State = 44

South Carolina State Income Tax Withholding:

  • The flat tax rate on supplemental wages has changed from 6.2% to 6%.
  • The deduction per personal exemption has increased from $4,860 to $5,000.
  • The maximum standard deduction in cases with any exemptions has increased from $7,300 to $7,500.
  • The tax table has changed.
  • Datamart Query: Tax State = 45

Vermont State Income Tax Withholding:

  • The annual amount per exemption has increased from $5,300 to $5,400.
  • The Single and Married tax tables have changed.
  • Datamart Query: Tax State = 50

Local Taxes

Indiana Local Income Tax Withholding:

  • Grant County
    • The tax rate has changed from 2.55% to 2.75%.
    • Datamart Query: Tax State = 18, County Code = 053
  • Howard County
    • The tax rate has changed from 1.95% to 2.35%.
    • Datamart Query: Tax State = 18, County Code = 067

Kentucky Local Income Tax Withholding:

  • Boone County
    • The taxable wage base is increasing from $77,400 to $79,494.
    • The employee tax rate remains at 0.8%.
    • The maximum tax has increased from $619.20 to $635.95.
    • Datamart Query: Tax State = 21, County Code = 015
  • City of Florence
    • The maximum withholding wage base has increased from $176,100 to $184,500 to coincide with the 2026 Federal OASDI wage base.
    • The payroll tax rate remains at 2%.
    • The maximum tax has increased from $3,522 to $3,690.
    • Datamart Query: Tax State = 21, City Code = 1150
  • Kenton County
    • The maximum withholding wage base has increased from $176,100 to $184,500 to coincide with the 2026 Federal OASDI wage base.
    • The payroll tax rate remains at 0.6997%.
    • The maximum tax has increased from $1,232.17 to $1,290.95.
    • Datamart Query: Tax State = 21, County Code = 117

Ohio Local Income Tax Withholding:

  • Bowling Green
    • The tax rate has increased from 2.0% to 2.15%.
    • Datamart Query: Tax State = 39, City Code = 0970

New York Local Income Tax Withholding:

  • Yonkers
    • The Single and Married tax tables have changed.
    • Datamart Query: Tax State = 36, City Code = 6820

You may execute Datamart queries to identify employees in affected state taxing areas. For Combined File Ad-Hoc query/analysis of applicable states, add STE Tax State 1 = (Tax State code listed above) or STE Tax State 2 = (Tax State code listed above) to the filter or prompt lines. Another option is the shared Datamart report titled "State Tax Code Report" (State Tax Code Query Now Available | January 18, 2024). For local tax queries, add the Tax State and/or City Code to the prompt lines (Occurrences – Other PE Pay).

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