FUTA Tax Calculator

The calculator starts with quarterly FUTA taxable wages. FUTA taxable wages are not the same as total payroll because the federal wage base is limited to the first $7,000 paid to each employee during the calendar year, and some payments can be exempt.

It then applies the federal 6.0% FUTA rate and the selected state unemployment credit. With the maximum 5.4% credit, the net rate is generally 0.6%. If a credit reduction applies, the calculator adds the credit-reduction tax as a fourth-quarter liability.

For deposit planning, the calculator tests accumulated FUTA tax each quarter. If the accumulated FUTA liability is more than $500, it shows the deposit due date. If the fourth-quarter balance is $500 or less, it shows the amount that may generally be paid with Form 940.

FUTA is an employer-only unemployment tax

The Federal Unemployment Tax Act funds federal and state unemployment administration. It is paid by the employer and is generally not withheld from employee paychecks. FUTA is reported annually on Form 940, but the tax can require quarterly deposits when the accumulated liability exceeds the deposit threshold.

For 2026, IRS Publication 15 lists a 6.0% FUTA rate on the first $7,000 paid to each employee. Employers that qualify for the full state unemployment credit can reduce the net rate to 0.6%, which is a maximum of $42 per employee who reaches the full federal wage base.

FUTA taxable wages are capped per employee

The most common FUTA mistake is using total annual payroll instead of FUTA taxable wages. If an employee earns $50,000, only the first $7,000 is subject to FUTA. If an employee earns $4,000, only $4,000 is subject to FUTA. Employers with many full-time employees often use up most of the FUTA wage base early in the year.

The calculator asks for quarterly FUTA taxable wages rather than total wages so it can model both annual tax and deposit timing. Use payroll records, Form 940 workpapers, or payroll-provider FUTA wage reports to enter the capped wage base by quarter.

State unemployment credit is what makes FUTA look small

The statutory FUTA rate is 6.0%, but many employers see a much smaller net federal amount because they receive a credit for state unemployment tax. The maximum ordinary credit is 5.4%, producing the familiar 0.6% net rate. The credit depends on paying state unemployment taxes in full, on time, and on the same wages that are subject to FUTA.

A lower credit can apply if state unemployment taxes are late, incomplete, not required on the same wages, or affected by a credit reduction state. Use the custom credit mode when payroll records or Form 940 instructions show that the ordinary 5.4% credit is not available.

Credit reduction states can add Q4 FUTA

A FUTA credit reduction state has outstanding federal unemployment loan balances and did not repay them by the required deadline. Employers in those states receive a smaller FUTA credit, so the federal FUTA bill increases. The IRS explains that increased FUTA tax from a credit reduction is considered incurred in the fourth quarter and is due by January 31 of the following year.

Credit reduction status is not always known early in the calendar year. The Department of Labor announces credit reduction information after the statutory deadline. When planning before final state data is published, use the credit reduction input as a scenario estimate and update it when Form 940 Schedule A guidance is available.

FUTA deposits are tested quarterly

FUTA deposits work differently from payroll withholding deposits. Employers figure FUTA tax quarterly. If the liability is $500 or less, it can generally be carried to the next quarter. Once accumulated FUTA liability is more than $500, the employer deposits the accumulated amount by the last day of the first month after the quarter.

If the fourth-quarter FUTA balance is $500 or less, the employer may generally pay it with Form 940 by the Form 940 due date. If all FUTA tax was deposited when due, the Form 940 filing deadline can be extended to the tenth day of the second month after year-end. The calculator shows both dates.

FUTA coverage tests matter before the math

Regular employers are generally subject to FUTA if they paid wages of $1,500 or more in any calendar quarter or had one or more employees for at least part of a day in 20 or more different weeks. Household and farm employers have separate tests. The calculator includes a coverage input because a mathematically correct FUTA amount is not owed if the employer is not subject to FUTA.

For adjacent payroll planning, use the FICA tax calculator for Social Security and Medicare, the contractor vs employee cost calculator when comparing W-2 payroll cost against 1099 contractor cost, and the tax deadline calendar for annual payroll filing dates.

Keep the research moving with FICA Tax Calculator, Contractor vs Employee Cost Calculator, Schedule C Profit and Tax Reserve Calculator, and Late Filing and Late Payment Penalty Calculator.