TAXES 18-13, Federal Income Tax Withholding

Published: January 26, 2018
Effective: Pay Period 01, 2018

Summary

The United States new Federal income tax withholding formula includes the following changes:

The flat tax rate on supplemental wages up to $1 million will change from 25 percent to 22 percent.
The flat tax rate on supplemental wages over $1 million will change from 39.6 percent to 37 percent.
The annual amount to add to nonresident alien taxable wages prior to calculating withholding will increase from $2,300 to $7,850.
The withholding allowance per exemption will increase from $4,050 to $4,150.
The Single (including Head of Household) and Married tax tables will change.

No action on the part of the employee or the personnel office is necessary.

Tax Formula

Acceptable Exemption Form:	W-4
Basis for Withholding:	Federal Exemptions
Acceptable Exemption Data:	S/M, Number of Allowances
TSP Deferred:	Yes
Special Coding:	None
Additional Information:	Single or Head of Household will both elect Single (S) marital status on line 3 of Form W-4.

Withholding Formula (Effective Pay Period 01, 2018)

Subtract the nontaxable biweekly Thrift Savings Plan contribution from the gross biweekly wages.
Subtract the nontaxable biweekly Federal Health Benefits Plan payment(s) (includes dental and vision insurance program, and flexible spending account - health care and dependent care deductions) from the amount computed in step 1.
Add the taxable biweekly fringe benefits (e.g., taxable life insurance) to the amount computed in step 2 to obtain the adjusted gross biweekly wages.
Multiply the adjusted gross biweekly wages by the number of pay dates in the tax year to obtain the gross annual wages.
If the employee is a nonresident alien, add $7,850 to the employee's annual gross pay.
Determine the personal exemption by applying the following guideline and subtract this amount from the gross wages to compute the taxable income:
Exemption Allowance = $4,150 x Number of Exemptions

Apply the taxable income computed in step 6 to the following table to determine the Federal income tax withholding:

Tax Withholding Table Single or Head of Household

If the Amount of Taxable Income Is:	The Amount of Federal Income Tax Withholding Should Be:
Over $0 but not over $3,700	$0
Over $3,700 but not over $13,225	$0 plus 10.0% of excess over $3,700
Over $13,225 but not over $42,400	$952.50 plus 12.0% of excess over $13,225
Over $42,400 but not over $86,200	$4,453.50 plus 22.0% of excess over $42,400
Over $86,200 but not over $161,200	$14,089.50 plus 24.0% of excess over $86,200
Over $161,200 but not over $203,700	$32,089.50 plus 32.0% of excess over $161,200
Over $203,700 but not over $503,700	$45,689.50 plus 35.0% of excess over $203,700
Over $503,700	$150,689.50 plus 37.0% of excess over $503,700

Tax Withholding Table Married

If the Amount of Taxable Income Is:	The Amount of Federal Income Tax Withholding Should Be:
Over $0 but not over $11,550	$0
Over $11,550 but not over $30,600	$0 plus 10.0% of excess over $11,550
Over $30,600 but not over $88,950	$1,905.00 plus 12.0% of excess over $30,600
Over $88,950 but not over $176,550	$8,907.00 plus 22.0% of excess over $88,950
Over $176,550 but not over $326,550	$28,179.00 plus 24.0% of excess over $176,550
Over $326,550 but not over $411,550	$64,179.00 plus 32.0% of excess over $326,550
Over $411,550 but not over $611,550	$91,379.00 plus 35.0% of excess over $411,550
Over $611,550	$161,379.00 plus 37.0% of excess over $611,550

Divide the annual Federal income tax withholding calculated in step 7 by the number of pay dates in the tax year to obtain the biweekly Federal income tax withholding.

Resources

Employees who intend to claim total Federal tax exemption for the calendar year (CY) 2018 must submit a new W-4 prior to February 19, 2018. Effective Pay Period 04, 2018, employees who claimed total exemption for CY 2017 and who have not filed a new W-4 for CY 2018 will have Federal taxes withheld as single taxpayers with zero withholding allowance. A W-4 filed for the prior year does not extend tax exemption into CY 2018. A new W-4 must be filed for CY 2018.

To view the updated tax formula, go to the HR and Payroll Clients page from the MyNFC drop-down menu on the National Finance Center (NFC) homepage. Select the Publications tab and select U.S. Income Tax Formulas from the Publications menu to launch the tax map. Select the desired State from the map provided for the formula.

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