What Is SUTA Tax? How Do You Calculate It?

What is SUTA tax?

State Unemployment Tax Act (SUTA) tax, also known as state unemployment insurance (SUI) or reemployment tax, is a portion of a business’s payroll taxes. SUTA tax funds the state’s unemployment insurance to cover the benefits paid to displaced and unemployed workers.

Each state determines which employers are required to pay this tax. “This tax provides unemployment benefits to workers who lose their jobs through no fault of their own,” explained Armine Alajian, founder and CPA at Alajian Group, Inc.

Who pays SUTA tax?

In most states, SUTA applies only to employers, not employees. Unlike Social Security, for example, which is withheld from all employees’ paychecks, employers usually pay all SUTA taxes.

The only states that require employees to pay state unemployment taxes are Alaska, New Jersey and Pennsylvania. Businesses with employees in these three states must withhold SUTA tax from their employees’ wages and pay those collected taxes to the state.

Most employers, including those with at least one employee, are subject to SUTA taxes. However, some exemptions — which vary from state to state — exist based on the number of employees and the duration of their employment.

What is the difference between SUTA and FUTA tax?

The Federal Unemployment Tax Act (FUTA) is a federal payroll tax employers pay on employee wages. Employees are exempt from FUTA, so they do not pay this tax. The FUTA tax rate is 6 percent on the first $7,000 of an employee’s earnings; the tax does not apply to earnings over $7,000. The maximum FUTA tax an employer is required to pay is $420 per year per employee before accounting for any credits.

FUTA taxes are generally paid quarterly (four times per year). Insurance premiums and certain fringe benefits are exempt from FUTA.

The SUTA tax is a state tax and is separate from the FUTA tax. However, businesses that pay their SUTA tax on time are eligible to receive a FUTA tax credit of up to 5.4 percent. This can reduce the employer’s total FUTA liability to 0.6 percent of the first $7,000 in wages per employee.

What is the SUTA wage base?

Each state determines its SUTA tax wage base each year. The wage base is the maximum amount (or threshold) of an employee’s income that the state can tax within a calendar year. Employers pay taxes on an employee’s wages until they meet this wage base.

All employers in the same state have the same SUTA wage base. For example, in 2025, employers in Washington have a SUTA wage base of $72,800. All nonexempt employers in Washington must pay SUTA tax on all their employees’ wages until each employee earns this amount during the calendar year.

SUTA wage base by state

Below is each state’s wage base for 2025:

• Alabama: $8,000
• Alaska: $51,700
• Arizona: $8,000
• Arkansas: $7,000
• California: $7,000
• Colorado: $27,200
• Connecticut: $26,100
• Delaware: $12,500
• District of Columbia: $9,000
• Florida: $7,000
• Georgia: $9,500
• Hawaii: $61,958
• Idaho: $53,500
• Illinois: $13,916
• Indiana: $9,500
• Iowa: $39,500
• Kansas: $14,000
• Kentucky: $11,400
• Louisiana: $7,700
• Maine: $12,000
• Maryland: $8,500
• Massachusetts: $15,000
• Michigan: $9,500
• Minnesota: $42,000
• Mississippi: $14,000
• Missouri: $9,500
• Montana: $43,000
• Nebraska: $9,000 ($24,000 for experienced employers)
• Nevada: $41,800
• New Hampshire: $14,000
• New Jersey: $43,300
• New Mexico: $31,700
• New York: $12,800
• North Carolina: $31,400
• North Dakota: $45,100
• Ohio: $9,000
• Oklahoma: $28,200
• Oregon: $54,300
• Pennsylvania: $10,000
• Puerto Rico: $7,000 
• Rhode Island: $29,200 ($30,700 for employers in the highest UI tax rate group)
• South Carolina: $14,000
• South Dakota: $15,000
• Tennessee: $7,000
• Texas: $9,000
• Utah: $48,900
• Vermont: $14,800
• Virgin Islands: $30,200
• Virginia: $8,000
• Washington: $72,800
• West Virginia: $9,500
• Wisconsin: $14,000
• Wyoming: $32,400

States may update their SUTA wage bases, so check your state’s Department of Labor website for the most accurate information.

What are SUTA tax rates?

The other key component in calculating your SUTA tax is the tax rate. Like the wage base, the tax rate varies by state. Additionally, when starting a new business, employers are subject to the new employer SUTA tax rate. Once a business becomes more established, the state assigns it a new tax rate within its employer tax rate range.

Some states also base SUTA tax rates on the industry. Construction businesses tend to pay higher SUTA tax rates than companies in nonconstruction industries. For example, in Ohio, new construction employers pay a SUTA tax rate of 5.6 percent (as of 2025), while the new employer SUTA tax rate is 2.7 percent.

Here are the new employer tax rate and the standard employer tax rate ranges for each state.

How do you calculate SUTA tax?

To calculate your SUTA tax as a new employer, multiply your state’s new employer tax rate by the wage base.

For example, if you own a nonconstruction business in California (as of 2025), the SUTA new employer tax rate is 3.4 percent, and the taxable wage base per worker is $7,000. Therefore, you must pay $238 (0.034 x $7,000) per employee.

The same calculations are done for businesses assigned an established business tax rate: Multiply the tax rate by the taxable wage base.

How do you set up and pay SUTA tax?

While each state has its own process for registering as a new employer and setting up a state unemployment tax account, there are some crucial items nearly all states require, including the following:

• Employer identification number (EIN): An EIN enables the IRS to identify your business on tax returns. It’s often required to register with your state’s unemployment department.
• Enrollment in the Electronic Federal Tax Payment System (EFTPS): The EFTPS allows employers to pay employment taxes online or over the phone.
• New-hire reporting account: This account allows employers to report newly hired employees. This practice helps the government collect child support, prevent unemployment insurance fraud and identify unlawful welfare assistance.
• Proof of workers’ compensation insurance: A workers’ compensation insurance policy provides wage protection and medical benefits to employees who have been injured on the job.

Each employer is responsible for reporting their SUTA tax liability to their respective state and making timely tax payments. “SUTA is usually paid quarterly with first-quarter taxes (January-March) paid in April,” Alajian explained. “Some states require monthly payments and might have other specific rules. Not paying or paying late may result in a penalty, interest, loss of benefits, legal consequences and could impact business operations.”

Once you’ve gathered the above requirements, follow these steps to set up and pay your SUTA tax:

1. Register with your state’s unemployment insurance department: Each state’s department has a different name. Conduct an internet search on “unemployment insurance department [state]” to find the one in your state. Some states have a paper form you must complete and return, while others have an online portal.
2. Report wages monthly: Report all wages for both full-time and part-time To avoid duplicating wages, each reference period must include the 12th of the month. This interval will depend on how frequently you run payroll. Every state has different payroll reporting procedures that may include reporting by mail or online.
3. Calculate your quarterly SUTA tax due: Use your state’s wage base and tax rate to calculate the SUTA tax due for each employee for the quarter. Some states’ online tax portals may calculate this amount based on your reported wages.
4. Pay SUTA tax quarterly: Submit your payment to your state’s unemployment insurance department by the deadline each quarter. This may be by mail or online, depending on your state. Check with your state to learn about specific payment instructions.

Antwyne DeLonde, founder and CEO of VisionX, emphasized the importance of seeking current information. “It’s best to reach out to your state labor department for updated rates and thresholds, understanding that most payments are due quarterly,” DeLonde advised.

Jennifer Dublino contributed to this article.