How it's calculated
The Federal Unemployment Tax Act (FUTA) tax is paid only by employers; nothing is withheld from employees. For 2026 the tax is 6.0% of the first $7,000 paid to each employee in the year. Employers that pay their state unemployment tax in full and on time get a credit of up to 5.4%, so the usual rate after the credit is 0.6%.IRS
The calculator follows the lines of Form 940:IRS
- Line 3: total payments to all employees.
- Line 4: payments exempt from FUTA, such as employer-paid health insurance and employer retirement plan contributions.
- Line 5: the part of each employee's pay above the $7,000 wage base.
- Line 7: taxable FUTA wages, line 3 minus lines 4 and 5.
- Line 8: line 7 × 0.6%.
- Line 9: if all of the wages were excluded from state unemployment tax (for example, wages of corporate officers in some states), there is no credit, and line 7 × 5.4% is added, bringing the rate to 6.0%.
- Line 11: the credit reduction for wages paid in a credit reduction state, from Schedule A.IRS
- Line 12: total FUTA tax.
Credit reduction states. When a state borrows from the federal unemployment trust fund and has not repaid the loan for two years in a row, employers there lose part of the 5.4% credit, so they pay more FUTA. For 2026, the Department of Labor lists California as a potential credit reduction state: a reduction of 1.5% for its outstanding loan, and up to 5.3% in total if add-on reductions apply. The final rates are set on November 10, 2026.U.S. DOL The calculator uses 1.5% for California by default and lets you choose the maximum or enter the final rate.
The formula
For each employee: FUTA wages = the smaller of (pay − exempt payments) or $7,000.
FUTA tax = total FUTA wages × (0.6% + credit reduction rate), or × 6.0% when the wages were excluded from state unemployment tax.
Worked example
Five employees each paid $50,000 in Texas owe $210 for the year, which is $42.00 per employee.
| Line | Amount |
|---|---|
| Line 3: Total payments to employees | $250,000 |
| Line 4: Payments exempt from FUTA | $0 |
| Line 5: Payments over the $7,000 wage base | $215,000 |
| Line 7: Taxable FUTA wages | $35,000 |
| Line 8: Tax before adjustments (× 0.6%) | $210 |
| Line 12: Total FUTA tax | $210 |
The same payroll in California, at the expected 1.5% credit reduction, owes $735.
The calculator reproduces the IRS's own examples: the Form 940 instructions' three employees paid $44,000, $8,000 and $16,000 with $4,500 of exempt benefits come to $21,000 of taxable FUTA wages and $126 of tax, and Schedule A's three employees at $20,000 in a state with a 1.2% reduction add a $252 credit reduction.IRSIRS Both are checked in the calculator's tests.
Assumptions and limitations
- All employees in one state, with the same pay. Enter average pay if it varies; employees paid under $7,000 a year lower the total, so for a precise figure add employees in groups.
- State unemployment tax paid on time. If you paid it late, or only some wages were excluded from state tax, the Form 940 line 10 worksheet reduces your credit.
- Who must pay. Most employers owe FUTA if they paid $1,500 or more in wages in any calendar quarter, or had an employee for some part of a day in 20 or more weeks, in 2025 or 2026. Household and farm employers have separate tests.IRS
- Deposits. FUTA is figured quarterly. A quarter's liability of $500 or less can be carried forward; Form 940 is filed once a year.