FUTA = 6.0%
Most employers get a credit of up to 5.4%, reducing the actual rate to 0.6%.
The Federal Unemployment Tax Act (FUTA), also called Federal Unemployment Insurance (FUI) combined with state unemployment systems, provides for payments of unemployment compensation to workers who have lost their jobs.
Most employers pay both a Federal and a state unemployment tax. Only the employer pays FUTA tax; it is not deducted from the employee’s wages.
The tax applies to the first $7,000 you paid to each employee as wages during the year. The $7,000 is often referred to as the federal or FUTA wage base.
You Get the Full 5.4% Credit If:
- You pay state unemployment taxes (SUTA) on time – This includes all required payments to your state unemployment fund.
- Your state isn’t a “credit reduction state” – Some states lose part of the credit if they have unpaid federal unemployment loans. (This applies to California, New York, and the U.S. Virgin Islands).
Effective FUTA rate by state with a credit reduction:
State/Territory | Credit Reduction | Effective FUTA Tax Rate | ||||||||||||
California | 0.9% | 1.5% | ||||||||||||
New York | 0.9% | 1.5% | ||||||||||||
U.S. Virgin Islands | 4.2% | 4.8% FUTA = 6.0%Most employers get a credit of up to 5.4%, reducing the actual rate to 0.6%. The Federal Unemployment Tax Act (FUTA), also called Federal Unemployment Insurance (FUI) combined with state unemployment systems, provides for payments of unemployment compensation to workers who have lost their jobs. Most employers pay both a Federal and a state unemployment tax. Only the employer pays FUTA tax; it is not deducted from the employee’s wages. The tax applies to the first $7,000 you paid to each employee as wages during the year. The $7,000 is often referred to as the federal or FUTA wage base. You Get the Full 5.4% Credit If:
Effective FUTA rate by state with a credit reduction:
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