Federal Unemployment Tax Act (FUTA) tax funds federal unemployment insurance — paid solely by employers (not deducted from employee wages). 2026 FUTA rate: 6% on the first $7,000 of each employee's annual wages = $420/employee maximum. Most employers receive a 5.4% credit for paying state unemployment tax (SUTA), reducing effective FUTA to 0.6% = $42/employee. States with FUTA credit reductions (when state borrowed from federal trust fund) face higher rates. Sole proprietors don't pay FUTA on themselves. Form 940 reports annually. FUTA, alongside SUTA, funds unemployment compensation programs administered by states.
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FUTA
August 22, 2026 · Aditya Gupta
Tax
Related terms
Alternative Minimum Tax
Alternative Minimum Tax (AMT) is a parallel tax system designed to ensure high-income taxpayers pay a minimum. Calculate…
American Opportunity Credit
The American Opportunity Credit provides up to $2,500 per student per year for the first four years of…
Bunching Deductions
Bunching deductions is the strategy of concentrating itemizable expenses into alternating years to exceed the standard deduction in…
Charitable Contribution Deduction
Charitable contribution deductions allow taxpayers who itemize to deduct cash donations to qualified 501(c)(3) charities up to 60%…
Child Tax Credit
The Child Tax Credit (CTC) provides $2,000 per qualifying child under 17, with $1,600 refundable as the Additional…
Deductible Business Expense
A deductible business expense must be both 'ordinary' (common in your industry) and 'necessary' (helpful to the business).…
