SUTA/FUTA
What Are SUTA and FUTA Taxes and How Do They Differ?
SUTA and FUTA are unemployment taxes employers pay to fund unemployment insurance. FUTA is a federal tax of 6.0% on the first $7,000 of wages per employee (often netting to 0.6% via state credit); SUTA is the state-level equivalent, with rates that vary by employer.
FUTA is calculated at a statutory 6.0% on the first $7,000 of each employee’s wages, but employers who pay state unemployment taxes on time and in full receive a credit of up to 5.4%, bringing the effective federal rate down to 0.6%—a net FUTA liability of just $42 per employee per year in most cases. SUTA is set entirely at the state level: each state sets its own wage base and assigns employers an experience-rated tax rate based on their history of unemployment claims.
A handful of states have been designated “credit reduction states” due to unpaid federal unemployment loan balances, which reduces the FUTA credit employers in those states can claim. Multi-state employers need to track SUTA obligations separately for every state where they have employees working.
Key FUTA and SUTA Rates, Credits, and Wage Bases
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FUTA: 6.0% statutory rate on first $7,000 of wages; typically nets to 0.6% with the full state credit.
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SUTA: rate and wage base set individually by each state; experience-rated based on claims history.
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"Credit reduction states" can reduce the FUTA credit employers are eligible for.
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Multi-state employers must track SUTA separately by state.
Frequently Asked Questions
Is FUTA paid by the employer or the employee?
FUTA is entirely an employer-paid tax—no portion is withheld from employee wages.
Why is the effective FUTA rate usually 0.6% instead of 6.0%?
Employers who pay state unemployment taxes on time receive a federal credit of up to 5.4%.
Do all states have the same SUTA wage base?
No—each state sets its own SUTA wage base and rate.
Do employers in every state pay the same effective FUTA rate?
No—only employers in credit reduction states pay more; most employers pay the standard 0.6% after the full state credit.
Does a business have to pay SUTA in every state where it has employees?
Yes—multi-state employers must register and pay SUTA separately in each state where they have employees working.
Related terms: Employer Payroll Taxes, FICA Taxes, Multi-State Payroll