Federal Unemployment Tax (FUTA)

Federal Unemployment Tax (FUTA) paystub meaning: A 6.0% federal tax on the first $7,000 of each employee's wages, paid entirely by the employer and never...

A 6.0% federal tax on the first $7,000 of each employee's wages, paid entirely by the employer and never withheld from your paycheck.

FUTA is the federal tax that pays to administer the unemployment system and covers the federal share of extended benefits. The rate is 6.0%, and it applies only to the first $7,000 of wages an employer pays each employee in a year. Every dollar above $7,000 is untouched. Almost no employer pays the headline 6.0%. Employers who pay their state unemployment tax on time receive a credit of up to 5.4%, which brings the FUTA rate down to 0.6%. At that rate the tax costs a maximum of $42 per employee for the whole year ($7,000 × 0.6%), and for most full-time workers the entire liability is finished within the first few weeks of January. The point that matters when you are reading a stub: FUTA has no employee half. Nothing about it is withheld from wages. If a line on your stub says FUTA and it is reducing your net pay, that is worth asking payroll about directly. The 0.6% is not universal either. When a state borrows from the federal unemployment account and does not repay it, employers in that state lose part of the 5.4% credit — 0.3% for the first year, and a further 0.3% for each year the loan stays outstanding. For 2025 wages, reported on the Form 940 filed in January 2026, the U.S. Department of Labor confirmed two credit reduction jurisdictions: California at 1.2% and the U.S. Virgin Islands at 4.5%. Connecticut and New York were on the potential list and repaid before the 10 November deadline, so their employers kept the full credit.

Tax entries on a pay statement depend on taxable wages, current employee elections, filing status, pay frequency, jurisdiction, and current agency instructions. Compare the current-period amount with year-to-date totals and the employer-issued record before treating it as final.

When this term appears on a statement, read its label, current amount, year-to-date amount, pay-period context, and any adjacent rate or hours together. Resolve a mismatch with the original issuer or the cited authority rather than changing a record to force a preferred result.