How are unemployment insurance taxes calculated?

Unemployment insurance (UI) taxes are paid by employers at both the federal and state levels. 

Federal Unemployment Tax Act (FUTA) 

• Generally, employers are required to pay 6% on the first $7,000 of each employee’s wages per year. 

• However, most employers qualify for a credit if they pay state unemployment taxes on time, reducing the effective FUTA rate to 0.6%.

State Unemployment Tax Act (SUTA)

• Each state sets individual tax rates and taxable wage bases for each employer. 

• These rates often vary based on the employer’s experience rating, which is determined by the previous unemployment claims made by employees.