U.S. FUTA: $7,000 → $42 net
FUTA (Federal Unemployment Tax Act) is the federal unemployment tax paid by the employer on the first $7,000 of wages per employee per year. The rate is 6.0%, but if you pay your state unemployment tax (SUTA) on time, the IRS allows a maximum credit of 5.4%, leaving a net rate of 0.6% and a maximum of $42 per employee per year (IRS Topic 759).
This calculator shows both amounts: gross FUTA (6.0%) and net FUTA (0.6%) after the maximum credit.
This page covers only the U.S. federal unemployment tax; it is not state SUTA and not Mexico or Guatemala law.
taxable base = min(employee's year-to-date wages, $7,000)
gross FUTA = 6.0% × taxable base
net FUTA = 0.6% × taxable base (with the maximum 5.4% state credit)
Worked example: $7,000 → $42
An employee earns $7,000 during the year:
- Gross FUTA: $7,000 × 6.0% = $420
- Maximum state credit: $7,000 × 5.4% = $378
- Net FUTA: $7,000 × 0.6% = $42
If the same employee earns $10,000 or $20,000, only the first $7,000 is taxable, so FUTA is still $42 net.
| Yearly wages | Taxable base | Gross FUTA (6%) | Net FUTA (0.6%) |
|---|---|---|---|
| $1,000 | $1,000 | $60 | $6 |
| $5,000 | $5,000 | $300 | $30 |
| $7,000 | $7,000 | $420 | $42 |
| $10,000 | $7,000 | $420 | $42 |
| $20,000 | $7,000 | $420 | $42 |
Rates and credit (Topic 759)
| Item | Rate | On $7,000 |
|---|---|---|
| Gross federal rate | 6.0% | $420 |
| Maximum state credit | 5.4% | $378 |
| Net rate with credit | 0.6% | $42 |
Multiple employees and the wage base
Each employee has a separate $7,000 base. Three employees at $7,000+ each cost $126 of net FUTA per year (3 × $42), not a single company-wide cap.
| Scenario | Employees | Net FUTA |
|---|---|---|
| 1 employee at $7,000 | 1 | $42 |
| 1 employee at $5,000 | 1 | $30 |
| 3 employees at $20,000 each | 3 | $126 |
| 10 employees at $7,000+ each | 10 | $420 |
The 5.4% credit
The full credit applies when you pay SUTA on time and your state does not have an outstanding federal loan. If a state borrows from the federal fund without repaying, the IRS can reduce the credit for employers in that state, pushing the net rate above 0.6%.
What this calculator does not include
- State SUTA, unemployment taxes, or any by-state matrix
- FICA (Social Security and Medicare): use the U.S. FICA calculator
- Payroll deductions from the employee's paycheck: FUTA is never withheld from workers
- Penalties, interest, or reduced credits in credit-reduction states
FUTA is an employer cost. If you see a "FUTA" line deducted from your paycheck as an employee, that is an error or an unauthorized charge: report it.
Educational estimate based on IRS Topic 759 and the Form 940 instructions. Your state, credit eligibility, and deductions can change the real amount. Confirm with a tax professional.
Official sources
- IRS Topic No. 759 — Form 940, 941, and 944 — FUTA rates and wage base
- IRS — About Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return — how to file
Only the employer. FUTA is a business payroll tax and is never deducted from a worker's paycheck, unlike FICA, which has an employee share. Example: $7,000 of wages → $42 net FUTA owed by the employer.
It is an IRS credit for paying your state unemployment tax (SUTA) on time. With the maximum credit, the net FUTA rate drops from 6.0% to 0.6%: on $7,000 that is $420 gross → $42 net. If your state has federal debt, the credit can be reduced.
No. Only on the first $7,000 of wages per employee per year. An employee earning $20,000 still generates only $42 of net FUTA; $5,000 generates $30.
No. FUTA is the federal tax filed on Form 940. SUTA is the state unemployment tax, with its own wage base, rates, and forms in each state. This calculator covers federal FUTA only.