Employer federal income tax withholding for 2025

Updated for tax year 2025 (filed in 2026) · IRS-sourced

For tax year 2025, employers generally must withhold federal income tax from employee wages as they are paid. The amount withheld depends on the employee’s Form W-4 and the IRS withholding method and tables the employer uses for the pay period.

When employers must withhold federal income tax

Federal law requires employers to deduct and withhold income tax from wages paid to employees. The withholding is collected at the source, meaning it is taken out of paychecks when wages are paid rather than waiting until the employee files a tax return.

For 2025 wages, the withholding amount is based on the employee’s withholding certificate, usually Form W-4, and the IRS withholding tables or computational procedures that apply for the payroll period. This rule comes from section 3402 and its regulations.

The regulations say an employer can elect among approved methods for figuring withholding. The main methods are the percentage method and the wage bracket method, and employers may use certain other IRS-approved methods where allowed.

How employers calculate 2025 withholding

Under the percentage method, the employer computes withholding using the employee’s anticipated filing status or marital status and other entries on the employee’s withholding certificate, using the applicable IRS percentage method tables and computational procedures in current IRS guidance.

The wage bracket method is another approved option. Employers can choose the percentage method, the wage bracket method, or certain other permitted methods, and they may use different methods for different groups of employees if the IRS rules allow it.

In practice, payroll systems usually rely on the employee’s current Form W-4, including filing status and any adjustments entered on the form. Employers should use the IRS tables and procedures that apply to the period in which the wages are paid.

What employee forms and special elections matter

An employer normally relies on Form W-4, Employee’s Withholding Certificate, to determine how much federal income tax to withhold. The employee’s filing status and other entries on the form drive the withholding calculation under the IRS tables.

Publication 15-T notes that a payee can use Step 4(c) to request no federal income tax withholding in situations where that option is allowed. Whether no withholding is permitted depends on the type of payment and the applicable IRS rules, so employers should follow the instructions for the specific form and payment type.

Publication 15-T also references special rules enacted for qualified tips and overtime-related deductions for employees’ income tax returns. Those provisions may affect employee tax results, but employers still must follow the applicable withholding rules and reporting instructions issued by the IRS for 2025.

Other federal payroll withholding employers should know

Federal income tax withholding is separate from Social Security and Medicare taxes. For 2025, the Social Security wage base is $176,100. Medicare tax continues without a wage base limit.

Employers must also withhold Additional Medicare Tax from an employee once that employee’s wages exceed $200,000 in the calendar year. The employer begins withholding in the pay period when wages go over $200,000 and continues through the end of the year.

Additional Medicare Tax is imposed only on the employee. There is no employer match for that extra 0.9% tax, even though the employer must withhold it once the $200,000 threshold is crossed.

Frequently Asked Questions

Do employers have to withhold federal income tax from wages in 2025?

Yes. Under 26 CFR § 31.3402(a)-1, employers are required to deduct and withhold federal income tax from employee wages using an approved method under section 3402.

What methods can an employer use to calculate 2025 withholding?

The employer may use the percentage method, the wage bracket method, or certain other permitted methods. This comes directly from 26 CFR § 31.3402(a)-1 and the percentage method rules in 26 CFR § 31.3402(b)-1.

What form tells the employer how much federal income tax to withhold?

Generally, Form W-4 does. 26 CFR § 31.3402(b)-1 says withholding under the percentage method is based on the employee’s filing status or marital status and other entries on the employee’s withholding allowance certificate, using applicable IRS guidance.

Can an employee ask for no federal income tax withholding?

Publication 15-T states that Step 4(c) can be used for a payee to request no federal income tax withholding in applicable situations. Employers should follow the IRS instructions for the specific payment type before honoring that request.

When must an employer start withholding Additional Medicare Tax?

Once wages paid to an employee exceed $200,000 in a calendar year, the employer must begin withholding Additional Medicare Tax in that pay period and continue through year-end. IRS payroll tax guidance states there is no employer share of Additional Medicare Tax.

Is Social Security withholding part of federal income tax withholding requirements?

No. Social Security and Medicare taxes are separate payroll taxes from federal income tax withholding. For 2025, the Social Security wage base is $176,100, while Medicare tax has no wage base limit.