Washington State Payroll Taxes in 2024 and 2025: What Are They?

If you are going to operate a business in Washington State, or more importantly, process payroll in Washington State, you need to know your way around payroll taxes and deductions. 

This is a guide for Washington State payroll taxes and deductions for 2023 / 2024:

Washington State Payroll Taxes and Deductions

When processing payroll in Washington State, businesses need to ensure they understand each of the payroll taxes in the state in order to manage compliance. Payroll taxes are part of payroll basics.

Businesses should also ensure a proper understanding of hours worked in Washington State, to ensure proper compensation, and thus make proper deductions.

A great way to ensure compliance and that tax deductions are handled properly, is by leveraging payroll software from a Washington State Payroll Company. Easier payroll tax management is just one of the many benefits of paperless payroll.

List of Washington State Payroll Taxes for 2024 and 2025

Washington State employers must understand the following payroll taxes for 2024 and 2025:

• Business & Occupation Tax
• Public Utility Tax
• FICA (Social Security & Medicare)
• FUTA (Unemployment)
• WA State Unemployment
• Washington Paid Family and Medical Leave
• Washington Cares

Here is a breakdown of each type of payroll tax:

Washington State Business & Occupation Tax

As opposed to a state income tax, Washington State has a Business & Occupation Tax (B&O). The state B&O Tax is a gross receipts tax, that is measured using the value of products, gross proceeds of sale, or gross income of a business. 

Important to note is that there are no deductions from the B&O tax for labor, materials, taxes, or other costs of doing business. Companies that pay the State Public Utility Tax do not have to pay the B&O Tax. 

Your B&O Tax rate is dependent on the tax classification of your business in Washington State.

Washington State Public Utility Tax

The Washington State Public Utility Tax is a tax only for public service businesses.

These include businesses that engage in:

• Transportation
• Communications
• The supply of energy, natural gas, and / or water

The tax rate depends on the type of utility activity:

FICA (Social Security & Medicare)

The Federal Insurance Contributions Act (FICA) applies to two different payroll taxes, Social Security Tax and Medicare Tax. 

Social Security Tax

This is a federal tax with the purpose of providing for those deemed of old age, survivors, or those on disability. 

The federal social security tax rate is 6.2% for the employer and 6.2% for the employee, or 12.4% total.

This tax does have a wage base limit on what wages are taxable in a given year. For 2023, this limit was $160,200 for the year.

The rate will not change for 2025.

Medicare Tax

This is a federal tax with the purpose of to funding the Medicare health system in the United States.

The federal medicare tax rate is 1.45% for the employer and 1.45% for the employee, or 2.9% total.

Employers must also withhold and additional 0.9% toward the Medicare Tax on an individual's wages paid in excess of $200,000 in a calendar year.

The rate will not change for 2025.

FUTA (Unemployment) Tax

All employers must withhold the appropriate amount for the Federal Unemployment Tax (FUTA). The FUTA tax rate is 6.0%. It applies to the first $7,000 paid to each employee as wages during the year. This is known as the FUTA wage base.

Many states, including Washington, have their own unemployment tax as well. 

Washington State Unemployment Tax

Washington State Unemployment Tax is the state unemployment tax, in addition to federal. 

State unemployment taxes are paid on your employees’ gross wages up to the taxable wage base for the current year. In 2023, this was $67,600.

As for the tax rate, this is specific to each business, and is calculated using multiple factors. 

The 2023 average tax rate for Washington State is 1.43%.

Tax Rate for Washington Paid Family and Medical Leave

While the primary purpose of Washington Paid Family Leave is to provide paid time off to employees who experience certain medical and family scenarios that would prevent them from working, it is funded by a payroll tax. 

The Washington Paid Leave 2024 premium rate is 0.74 percent of each employee’s gross wages up to the 2024 Social Security cap ($168,600). 

For 2025, as of January 1st, 2025 the premium rate will increase to 0.92 percent of each employee’s gross wages up to the 2024 Social Security cap ($176,100). 

The employer covers 28.57% of the contribution, while employee withholding covers the rest. However, employers with less than 50 employees do not need to pay the employer portion of the premium. For 2025, employers will cover 28.48%.

Tax Rate for Washington Cares

The Washington Cares Fund is the latest state insurance program intended to provide long-term health care benefits. It is also funded by payroll taxes.

Employers must withhold up to $0.58 for every $100 earned (0.58% of gross earnings).

Get Help with Washington State Payroll Taxes

Payroll taxes can be complicated, and with a state like Washington that has some cutting-edge labor laws to protect employee rights, even more so. 

Businesses who are struggling with Washington State payroll taxes should reach out to a Washington State payroll provider, and may want to consider if it is time to outsource payroll, or consider the benefits of paperless payroll solutions. 

To learn more about how PayNW is already helping countless businesses with payroll taxes, withholdings and filings, or to learn more about our Tax Registration Service, contact us today.

Watch our payroll demo video below to learn more about how our software can help manage your premium collections and payroll deductions.