Each new year brings changes and updates to payroll requirements, and 2026 will be no exception. Also without exception, we do our best each year to compile the extensive list of items that have the potential to cause payroll changes in your organization. While long, we hope it provides a valuable reference guide for your organization..
One Big Beautiful Bill
Beginning in 2025, the One Big Beautiful Bill introduces new federal tax deductions for qualified tips and qualified overtime. To support these rules, payroll administrators must begin tracking tips and overtime as distinct earning types and, starting in 2026, ensure they are separately reported on year-end W2s. Standard tax withholding on these earnings continues as usual, and the deductions are applied by employees when they file their tax returns. For 2025, the IRS is offering transition-year flexibility, but payroll teams should begin capturing this data now to support accurate reporting and employee tax filings in the future. For additional details, please see our blog post Overtime and Tip Requirements in the Big Beautiful Bill: A Guide for Payroll Administrators.
Oregon Pay Transparency
Oregon Senate Bill 906 (SB 906), effective January 1, 2026, requires employers to provide every new hire with a clear, written explanation of how pay and deductions work. Employers may deliver this information on paper, electronically, or by posting it in a conspicuous place. The explanation must be reviewed and updated annually, by January 1.
Failure to comply may result in civil penalties of up to $500 per violation, enforced by the Oregon Bureau of Labor and Industries (BOLI). SB 906 is designed to ensure transparency by helping employees fully understand their wages, deductions, and benefits. For additional information regarding this new requirement, please reference our recent B/P Blog post.
FICA Tax Rate Increase
Beginning January 1, 2026, the maximum amount of earnings subject to the Social Security payroll tax will increase from the current $176,100 to $184,500. The 7.65% employee tax rate remains unchanged and is the combined rate for Social Security (6.2%) and Medicare (1.45%). These rates do not include an additional 0.9% that individuals with an earned income of $200,000 and more pay.
State Unemployment Tax Act (SUTA)
The current Oregon SUTA base for 2025 is $54,300. The 2026 base will be $56,700. The Washington State base for 2025 is currently $72,800, and the base rate for 2026 will be $78,200. The base rate is the maximum amount of wages per employee for which unemployment tax is applicable each year and is the same for all employees within a state, while the unemployment rate is specific to each individual company.
Federal Unemployment Tax Act (FUTA)
The current FUTA rate is 6.0% of the first $7,000 of employee wages. Employers generally get a credit of up to 5.4% (state tax credit) if unemployment taxes are paid in full and on time. The FUTA rate after the credit is 0.6%.
401(k) Limit Increase
The contribution limit for employees who participate in 401(k) and 403(b) plans in 2026 will increase slightly from the current $23,500 to $24,500. Employees age 50 and over will have the ‘catch-up’ contribution limit of $8,000, which is a slight increase from 2025. Those between 60 and 63 will be eligible for a special catch-up contribution of up to $11,250 under the SECURE 2.0 Act. The SECURE 2.0 Act’s final regulations, issued by the IRS in September 2025, also requires the mandatory Roth catch-up rule for high earners (over $145k FICA wages) start January 1, 2026. A “good faith” standard applies until 2027, allowing plan sponsors time to implement. The maximum contributions from all sources (employer and employee combined) will increase in 2026 to $72,000.
Flexible Spending Account (FSA) / Parking and Transit Limits
Employee pre-tax deductions for FSA health reimbursement accounts will increase slightly for the 2026 plan year to $3,400. This is an increase of $100 over 2025. For health FSA plans that contain the carryover feature, the maximum carryover amount for 2026 will increase to $680. Parking and transit limits for 2026 are also increasing slightly to $340 per month. Dependent care reimbursement will also increase for the first time since 1986 to $7,500 ($3,750 if married and filing separate taxes).
Health Savings Account (HSA) Contributions
For 2026, the IRS will increase pre-tax deductions for HSAs slightly to $4,400 for individual coverage (a $100 increase) and $8,750 for family coverage (a $200 increase). Those 55 and older can contribute an additional $1,000 as a catch-up contribution. This is for members who have high-deductible medical coverage that qualifies to be paired with Health Savings Accounts.
ACA
Applicable Large Employers (ALEs) are defined as having an average of 50 full-time employees. Small employers that are part of an aggregate group may also be classified as an ALE. ALE’s annual electronic filing deadline for ACA 1095-C forms for 2025 is March 31, 2026. ALEs must provide 1095-C forms to full-time employees by no later than March 2, 2026. Employers have the option of affirmative consent electronic delivery or a new on-demand website posting method (effective in 2025). These options reduce the administrative burden of automatically mailing forms to all employees. Additional information can be found on the U.S. Department of Labor website when referencing the Paperwork Burden Reduction Act (PBRA).
Workers’ Compensation
Workers’ Compensation pure premium rates are the base rates before insurer costs are added. The pure premium is the portion employers pay to cover claims and to maintain workplace safety programs. The pure premium rates for 2026 are expected once again to decrease by 3.3% from 2025. This marks 13 years of average decreases in the pure premium rate. The pure premiums are combined with an assessment rate, which is expected to remain unchanged from 2025 at 9.8% of premiums paid.
Oregon Paid Family and Medical Leave
Paid Leave Oregon is a family, medical, and sick leave insurance program that was created to provide eligible employees with paid time off from work for qualifying reasons. Employers will continue to be responsible for 40%, and employees 60%, of the contribution rate, which continues at the rate of 1% for 2026. These contribution percentages apply to up to $184,500 of wages in 2026 (i.e. the Social Security taxable maximum wage). Employers with 25 or more employees are required to submit the employee and employer contributions. Employers with fewer than 25 employees do not need to make the employer contribution but are still required to submit the employee portion.
Oregon Minimum Wage
Minimum wage adjustments in Oregon are effective July 1st of each year. The minimum wage for July 1, 2025 through June 30, 2026 is $15.05 for Standard, $16.30 for Portland Metro, and $14.05 for Nonurban counties. Reference the interactive map on the Oregon.gov website to find the minimum wage for specific counties or metropolitan areas. Rates effective July 1, 2026 will be adjusted based on the Consumer Price Index by April 30th.
Oregon Local Taxes
Neither the 2026 Lane Transit District or the TriMet transit tax rate has been released yet. As soon as they are, we will update this post. The Wilsonville transit tax remains unchanged at 0.005 for 2026. The Eugene Employee Payroll Tax rate table was released for the period July 1, 2025 to June 30, 2026. Wages less than $31,304 are exempt, while the rate is 0.0044 for wages equal to or more than $31,304.
Oregon Statewide Transit Tax
The Statewide Transit Tax (STT) will increase for the first time since its inception in July 2018. Effective January 1, 2026, the current rate of one-tenth of one percent, or 0.001, will increase to two-tenths of one percent, or 0.002. The STT rate increase will sunset after 2027 and revert to one-tenth of one percent for 2028 and beyond. This tax applies to wages of Oregon residents (regardless of where work is performed) and wages of nonresidents who perform services in Oregon. For additional information and filing instructions, please reference the Oregon.gov website.
Oregon Workers’ Benefit Fund
The current 2025 Oregon Workers’ Benefit Fund rate of 2.0 cents per hour worked will decrease in 2026 to 1.8 cents. Employers must continue to pay at least half of the amount (i.e. 0.9 cents) and deduct no more than 0.9 cents per hour worked from employees’ wages. This fund pays for benefits to injured workers and their beneficiaries. The fund also helps injured workers return to work.
Oregon Metro Supportive Housing
The current Oregon Metro Supportive Housing personal income tax is 1% on taxable income – adjusted in 2026 for inflation – above $128,000 for individuals ($205,000 for those filing jointly). The business income tax remains unchanged at 1% on net income with gross receipts above $5 million. Currently, tax filers who have income from business activity both within and without the Metro district must apportion that income to determine the amount earned within the Metro district. Oregon residents within the Metro jurisdiction are subject to this tax, as are non-residents with wages paid for work performed within the Metro District. Metro’s boundaries do not align with Clackamas, Multnomah, and Washington Counties. To determine if a residence or workplace is within Metro’s jurisdiction, we advise you to use the Find your councilor tool on Metro’s website.
Preschool For All (PFA) Tax
The Multnomah County Preschool for All (PFA) personal income tax rate is 1.5% on Multnomah County taxable income over $125,000 for individual filers and $200,000 for joint filers, as well an additional 1.5% on Multnomah County taxable income over $250,000 for individuals and $400,000 for joint filers. The rate will increase by 0.8% in 2027 (meaning the 1.5% rate will increase to 2.3% and the 3% rate will increase to 3.8%). For additional information, please reference the Multnomah County FAQ.
OregonSaves
OregonSaves was rolled out in October 2017 and is a mandatory state retirement program. Employers that do not offer an employer-sponsored retirement plan are required to facilitate OregonSaves. Employees make contributions to personal IRAs through payroll deductions starting at 5% of gross pay, which increase 1% each year of participation up to 10%. Employees can choose additional amounts. Employers that are out of compliance are subject to fines and penalties.
Washington Paid Family and Medical Leave
Effective January 1, 2026, the Paid Family and Medical Leave premium amount will increase to 1.13% (up from 0.92%) for gross wages up to the 2026 Social Security cap of $184,500. The premium is shared by the employer (28.57%) and the employee (71.43%) for employers with over 50 employees. An employer can choose to pay the employee portion of the premium. Employers with fewer than 50 employees are not required to pay the employer portion of the premium but are still required to collect and remit the employee portion. For additional information you can visit the Washington Paid Family & Medical Leave website.
Washington Long Term Care
For 2026, Washington Cares Fund maintains the 0.58% payroll tax rate, offering a $36,500 lifetime maximum benefit (indexed for inflation). Employers aren’t required to pay any share of the contribution for employees unless they choose to. However, employers are responsible for collecting and remitting payments. Unlike the Washington Paid Family and Medical Leave program, contributions do not top out at the Social Security maximum., For additional information, please reference the Washington Cares Fund website.
Washington Minimum Wage Increases
Effective January 1, 2026, the Washington State minimum wage will increase from $16.66 to $17.13 per hour (a 2.8% increase). Seattle, Tukwila, and The City of SeaTac have their own local minimum wage rates that exceed the state minimum wage. To find the correct wage for your organization and to download the most recent minimum wage poster, please visit the Washington State Department of Labor & Industries website.
As we come to the close of another year, you may be examining your systems and processes. At Bennett/Porter, we are People Inspiring Solutions. If we can be of assistance in making your business operate more efficiently, we would love to help! Please reach out and let’s chat.
We wish you and your family a very happy and safe holiday season!
Let Bennett/Porter and People Savvy HCM guide you toward perfect year-end payroll. We’re here to help!
