2023 Minimum Wage & Tax Changes

12.06.22

The new year brings both new resolutions and state minimum wage and tax changes. We’ve compiled what employers need to know to stay compliant and prepare your 2023 budget!

Minimum Wage

Several states are increasing their minimum wage. As a reminder, when federal and state or local payroll laws differ, the employer must adhere to the law which benefits the employee the most. In cases where the state minimum wage is higher than the federal minimum wage of $7.25, the employee must be paid the higher state wage. 

Many localities and counties may have differing minimum wages, as well. Be sure to comply with the law that benefits the employee the best, and inform Nextep of any changes needed in rate of pay.

Below is a listing of states whose minimum wage will increase effective January 1, 2023, unless otherwise noted. It’s also important to note that some states may also have salary threshold increases for exempt employees that are not listed in this article. If you have questions about those, reach out to your Nextep HR business partner or find a complete list of minimum wage by the state on the Department of Labor’s website.

Alaska: $10.85

Arizona: 

  • $13.85, non-tipped employees
  • $10.85, tipped employees (based on a $3.00 hourly tip credit)

California: $15.50 (Remain mindful of the local minimum wage ordinances in California)

Colorado: $13.65

Delaware: $11.75

Massachusetts: 

  • $15.00
  • $6.75 service rate
  • Sunday premium pay and holiday pay eliminated

Michigan: $12.00 (February 19, 2023)

Minnesota: (set to increase again July 2023)

  • $10.59, large employers
  • $8.63, other
  • Minneapolis: $15.19
  • St. Paul: Small Employers (6-100) $13.00
  • St. Paul: Micro Employers (5 or fewer) $11.50

Montana: $9.95

Nebraska: $10.50

New Jersey: 

  • $14.13, employers with 6+ employees 
  • $12.93, employers with less than 6 employees or season workers

New Mexico: $12.00

New York State: $14.20 (December 31, 2022) 

  • The minimum wage for employees working in New York City, Nassau, Suffolk, and Westchester counties remains unchanged at $15 per hour.

Ohio: $7.95 (employer annual gross less than $371,000)

  • $10.10, non-tipped employees
  • $5.05, tipped employees

Rhode Island: $13.00

South Dakota: $10.80

Washington: $15.74

Vermont: $13.18

Federal Minimum Wage (remains the same): $7.25

Tax Changes

To aid in preparing your company’s budget for 2023, below is a breakdown of upcoming changes.

  • Social Security Wage Base: $160,200
  • FICA – Social Security (OASDI): 6.2%, up to the wage base
  • FICA – Medicare: 1.45% up to $200,000, then 2.35%
  • Maximum 401(k) Contribution: $22,500
  • Catch-up 401(k) Limit for People Over 50: $7,500
  • SUTA Wage Base – Oklahoma: $25,700
  • SUTA Wage Base – Texas: $9,000
  • SUTA Wage Base – Colorado: $20,400
  • SUTA Wage Base – All Other States: see americanpayroll.org
  • FUTA Rate: 0.60%
  • Mileage Rate – Business Use: $0.625 per mile (as of 7/1/22)
  • NEW Business Mileage Rate: increase to $0.655 cents per mile, effect on January 1, 2023. 

Nextep does not give tax or legal advice. Please get in touch with your tax advisor or legal counsel.

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