FUTA tax rate for 2026 and 2027

The Federal Unemployment Tax Act (FUTA) tax is 6.0% of the first $7,000 you pay each employee in a year. Employers who pay their state unemployment tax in full and on time get a credit of up to 5.4%, so the rate most employers actually pay is 0.6%, or $42 per employee a year. The rate and the $7,000 wage base are set by federal law and have not changed since 1983; they are the same for 2026 and 2027.

Only employers pay FUTA. Nothing is taken from employees’ paychecks, unlike Social Security and Medicare.

California’s 2026 credit reduction

When a state borrows from the federal government to pay unemployment benefits and doesn’t repay the loan in time, employers in that state lose part of the 5.4% credit. On 12 November 2026 the U.S. Department of Labor confirmed that California is the only credit reduction state for 2026, with a reduction of 1.5%. California employers pay an effective FUTA rate of 2.1%, or up to $147 per employee, for 2026. It is the fifth year in a row that California has had a credit reduction.

The extra is all due with Form 940 in early 2027, not with your quarterly deposits, so California employers with many staff should set it aside now: with 50 employees it is $5,250 more than the usual $2,100. The U.S. Virgin Islands repaid its loan in 2026 and has no reduction.

2027: credit reductions are only confirmed in November of each year. California still owes about $20 billion, so another reduction is expected for 2027. The reduction grows by 0.3% a year, so it would be at least 1.8% (an effective rate of 2.4%, or $168 per employee).

How to work out FUTA tax

Take each employee’s wages up to $7,000. Someone paid $45,000 counts as $7,000; a part-timer paid $4,000 counts as $4,000.
Multiply by 0.6%, or by 0.6% plus your state’s credit reduction.
Example: 5 employees each earning over $7,000 in Texas: 5 × $7,000 × 0.6% = $210. The same team in California for 2026: 5 × $7,000 × 2.1% = $735.

Some payments aren’t FUTA wages, such as most employer contributions to retirement plans and health insurance, and wages paid to your spouse, your children under 21 or your parent if you’re a sole proprietor. Nonprofits that are 501(c)(3) organizations and state and local governments don’t pay FUTA.

Who has to pay FUTA

You owe FUTA tax if you paid wages of $1,500 or more in any calendar quarter, or had at least one employee for some part of a day in 20 or more different weeks, in this year or last year. Household employers (for a nanny or housekeeper, for example) owe it if they paid $1,000 or more in cash wages in any quarter. Farm employers have their own tests.

When to pay and file Form 940

Deposits: work out FUTA owed each quarter. Once the amount owed (including earlier quarters you didn’t deposit) passes $500, deposit it through EFTPS by the last day of the month after the quarter ends: 30 April, 31 July, 31 October and 31 January.
Form 940 for 2026: due 1 February 2027, as 31 January is a Sunday. If you deposited everything on time, you have until 10 February 2027.
Form 940 for 2027: due 31 January 2028.
Credit reduction: reported on Schedule A of Form 940 and paid with the return or the fourth-quarter deposit.

State unemployment tax (SUTA)

State unemployment tax is usually much bigger than FUTA. Each state sets its own rate for each employer, based on how many former employees have claimed benefits, and its own wage base, from $7,000 in California and Florida to $82,000 in Washington for 2027. The calculator uses your state’s wage base: enter the rate from your state rate notice. See every state’s figure on the SUTA wage base by state page.

For the taxes taken from your employees’ pay, use the Social Security tax calculator or the US paycheck calculator. Sources: IRS Topic 759 and the Form 940 instructions; U.S. Department of Labor FUTA credit reductions, 12 November 2026.

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