How to Use Circular E Withholding Tables: Wage Bracket vs. Percentage

To use the Circular E withholding tables, you start with a completed Form W-4, then open Publication 15-T and choose one of two methods: the Wage Bracket Method, where you look up the withholding amount in a table indexed by pay frequency and filing status, or the Percentage Method, where you calculate the tax on the employee’s adjusted wages using graduated rates. Circular E itself (IRS Publication 15) sets the rules; the actual rate tables now live in the companion Publication 15-T.¹²

Both methods produce a per-paycheck federal income tax withholding figure. The Wage Bracket Method is designed for manual payroll and gives you a single number from a lookup. The Percentage Method is designed for software and produces a more exact result on the same underlying rates. You pick one and stay with it for that pay period; either is acceptable under Circular E.

What You Pull from the W-4 First

Every table lookup depends on information the employee provides on Form W-4. Before you touch Publication 15-T, you need to have in front of you:

The employee’s filing status from Step 1(c): Single or Married filing separately, Married filing jointly (or Qualifying surviving spouse), or Head of household. Each status has its own set of brackets.
Whether the Step 2(c) multiple-jobs box is checked. If it is, you use the higher withholding rate schedule for the full wage amount.
The total dollar amount of dependent credits claimed in Step 3.
Any other income (Step 4(a)), additional deductions (Step 4(b)), or extra per-paycheck withholding (Step 4(c)).

If an employee has never given you a W-4, withhold as though they are single with no other entries, which typically produces the highest withholding on a single income. When a revised W-4 arrives, put it into effect no later than the start of the first payroll period ending on or after the 30th day from the date you received it.³ Always use the most recent signed form on file.

An employee who qualifies to claim exempt (no federal income tax liability last year and none expected this year) checks the “Exempt” box and skips the rest of the form. The exemption expires annually; a 2026 exemption must be renewed by February 16, 2027, or you revert to the single, no-adjustments default.⁴

The Wage Bracket Method, Step by Step

The Wage Bracket Method is the faster of the two and works well if you’re running payroll by hand. Open Publication 15-T and find the wage bracket tables that match your pay frequency: weekly, biweekly, semimonthly, or monthly.² Within that section, there are separate tables for each filing status, and each filing-status table is split into two columns depending on whether the Step 2 box on the W-4 is checked.

The mechanics are these:

Take the employee’s gross wages for the pay period.
Find the row in the correct table that brackets that wage amount.
Read across to the tentative withholding figure.
Subtract the per-pay-period value of the dependent credits claimed in Step 3 (Publication 15-T shows you how to prorate the annual credit amount to your pay frequency).
Add any additional per-paycheck withholding the employee requested in Step 4(c).

The number you end up with is the federal income tax to withhold for that paycheck. The tables already bake in the standard deduction and the tax rates at each income level, so you’re not doing that math yourself. The 2026 standard deduction amounts embedded in the tables are $16,100 for single filers, $32,200 for married filing jointly, and $24,150 for head of household.⁵

The tradeoff for the simplicity is precision. Everyone within a given wage bracket receives the same withholding amount, so an employee at the top of a bracket is treated identically to one at the bottom. For a small employer, that approximation is normally close enough.

The Percentage Method, Step by Step

The Percentage Method produces a more exact figure and is what payroll software uses. Publication 15-T provides a worksheet (Worksheet 1A for most employers) that walks the math from top to bottom, and separate percentage-rate tables broken out by pay frequency and by whether Step 2(c) is checked.²

The sequence:

Start with gross wages for the pay period. Add any Step 4(a) other income (converted to the pay period).
Subtract the prorated standard deduction built into the worksheet, plus any Step 4(b) additional deductions (also prorated). This gives you the adjusted wage amount.
Apply the graduated tax rates from the Percentage Method table that matches the employee’s filing status and Step 2 status. The 2026 rates range from 10% at the bottom to 37% on taxable income above $640,600 for single filers and $768,700 for married filing jointly.⁵
From that tentative tax, subtract the per-pay-period value of Step 3 dependent credits.
Add any Step 4(c) extra withholding.

The result is the federal income tax to withhold. Because the calculation runs on the exact adjusted wage rather than on a bracket range, it tracks the employee’s actual annual liability more closely than the Wage Bracket Method does. That’s why automated systems default to it.

Withholding on Bonuses and Other Supplemental Wages

Supplemental wages, meaning bonuses, commissions, back pay, severance, and similar payments outside the regular payroll cycle, follow their own rule set inside Publication 15. As long as the employee’s total supplemental wages from you for the year stay under $1 million, you have two choices:¹

Withhold a flat 22% on the supplemental payment. No W-4 lookup, no table. This is the common approach for one-off bonuses.
Use the aggregate method: combine the supplemental wages with regular wages for the pay period, calculate withholding on the total using the Wage Bracket or Percentage Method, then subtract the withholding you already computed on the regular wages. The difference is what you withhold on the supplemental portion.

Once an employee’s supplemental wages from your company cross $1 million in a calendar year, the choice disappears. You must withhold at a flat 37% on every dollar above the threshold, regardless of anything on the W-4.¹

What Changed for 2026

The 2026 tables reflect updates from the One Big Beautiful Bill Act, which made permanent the individual tax rate structure and the higher standard deduction amounts originally enacted under the 2017 Tax Cuts and Jobs Act.² Bracket thresholds and standard deductions were also adjusted for inflation, so prior-year tables will produce incorrect withholding. If you run payroll manually, confirm you’re working from the 2026 edition of Publication 15-T; if you use software, your provider should have already loaded the new tables.

A separate new provision lets employees deduct qualified overtime compensation for tax years 2025 through 2028, which can affect withholding on overtime pay. Check the current edition of Publication 15-T for how this interacts with the standard methods before adjusting anything by hand.

The Tables Only Cover Federal Income Tax

One boundary worth being explicit about: the Circular E withholding tables handle federal income tax withholding only. Social Security and Medicare withholding is a separate calculation that doesn’t use the W-4 or the tables at all. For 2026, you withhold 6.2% for Social Security on wages up to the $184,500 wage base, and 1.45% for Medicare on all wages, plus an additional 0.9% Medicare tax on wages above $200,000 from your company.⁶¹ These are flat rates applied on top of whatever federal income tax the tables tell you to withhold. State and local income tax withholding follows entirely separate state rules and is outside Circular E’s scope.

1
Internal Revenue Service. Publication 15 (2026), (Circular E), Employer’s Tax Guide
2
Internal Revenue Service. Publication 15-T (2026), Federal Income Tax Withholding Methods
3
Internal Revenue Service. Topic No. 753, Form W-4, Employees Withholding Certificate
4
Internal Revenue Service. Form W-4, Employees Withholding Certificate
5
Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
6
Social Security Administration. Contribution and Benefit Base