2017 FUTA Wage Base
The 2017 FUTA Wage Base is $7,000.
Effective 2017-01-01Source: 2017 Instructions for Form 940 (IRS)Verified 2026-08-29
Compared with 2016
Every figure on this page is unchanged from 2016.
| Item | 2016 | 2017 | Change |
|---|---|---|---|
| Wage base | $7,000 | $7,000 | +$0 (+0.0%) |
Who it applies to
Employers required to file Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return
What changed this year, and why
For 2017, the Federal Unemployment Tax Act (FUTA) wage base is $7,000 per employee.
Common questions
- What is the FUTA wage base?
- The FUTA wage base is the maximum amount of pay per employee in a calendar year that is subject to FUTA tax. For 2017, the FUTA wage base is $7,000. Only the first $7,000 paid to each employee, after subtracting any payments exempt from FUTA tax, is subject to FUTA tax.
- Where is the FUTA wage base reported?
- The FUTA wage base is used on Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return, to determine the total payments made to each employee in excess of the wage base.
The $1,500 quarter test and the 20 week test
Most employers must file Form 940 if they meet either of two tests during 2016 or 2017. The first test looks at wages: if you paid $1,500 or more to employees in any calendar quarter, you must file. The second test looks at duration: if you had one or more employees for at least some part of a day in any 20 or more different weeks, you must file. Count all full-time, part-time, and temporary employees for the 20-week test, but if your business is a partnership, don't count its partners. You only need to answer "Yes" to one of these questions to trigger the filing requirement. If your business was sold or transferred during the year, each employer who met at least one test must file, but don't include wages paid by the predecessor employer unless you're a successor employer.
Except as noted below, if you answer “Yes” to either one of these questions, you must file Form 940. Did you pay wages of $1,500 or more to employees in any calendar quarter during 2016 or 2017? Did you have one or more employees for at least some part of a day in any 20 or more different weeks in 2016 or 20 or more different weeks in 2017? Count all full-time, part-time, and temporary employees. However, if your business is a partnership, don't count its partners.
2017 Instructions for Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return (IRS)
The rate charged on the wage base, and the state credit against it
The FUTA tax rate for 2017 is 6.0% on the first $7,000 you pay to each employee during the calendar year after subtracting any payments exempt from FUTA tax. Most employers receive a maximum credit of up to 5.4% against this FUTA tax for state unemployment taxes paid. The credit is available if you paid all required state unemployment tax by the due date of Form 940 or if you were not required to pay state unemployment tax during the calendar year. After claiming the maximum credit, you pay the remaining portion of the 6.0% rate on wages up to the $7,000 wage base per employee. Every quarter, you must figure how much of the first $7,000 of each employee's annual wages you paid during that quarter to determine your tax liability.
The FUTA tax is 6.0% (0.060) for 2017. Most employers receive a maximum credit of up to 5.4% (0.054) against this FUTA tax. Every quarter, you must figure how much of the first $7,000 of each employee's annual wages you paid during that quarter.
2017 Instructions for Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return (IRS)
Why employers in some states pay more
A credit reduction state is one that has not repaid money borrowed from the federal government to pay unemployment benefits. The Department of Labor designates which states fall into this category. When a state is a credit reduction state, employers who pay wages subject to that state's unemployment tax laws must pay additional federal unemployment tax when filing Form 940. For 2017, there are credit reduction states. If you paid any wages subject to the unemployment compensation laws of a credit reduction state, your credit against federal unemployment tax is reduced based on the credit reduction rate for that state. You must use Schedule A to figure the credit reduction. The result is that your FUTA tax on the $7,000 wage base per employee is higher than it would be for employers in states that have repaid their loans in full.
A state that hasn't repaid money it borrowed from the federal government to pay unemployment benefits is a “credit reduction state.” The Department of Labor determines these states. If an employer pays wages that are subject to the unemployment tax laws of a credit reduction state, that employer must pay additional federal unemployment tax when filing its Form 940.
2017 Instructions for Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return (IRS)
Household employers are tested separately
Household employers are subject to different filing thresholds than other employers. If you are a household employer, you must pay FUTA tax on wages paid to your household employees only if you paid cash wages of $1,000 or more in any calendar quarter in 2016 or 2017. This threshold applies specifically to household employees and is separate from the tests that apply to other types of employers. A household employee performs household work in a private home, a local college club, or a local chapter of a college fraternity or sorority. Generally, employers of household employees must file Schedule H instead of Form 940. However, if you have other employees in addition to household employees, you can choose to include the FUTA taxes for your household employees on Form 940 instead of filing Schedule H. The $7,000 wage base applies to household employees the same way it applies to other employees.
If you’re a household employer, you must pay FUTA tax on wages that you paid to your household employees only if you paid cash wages of $1,000 or more in any calendar quarter in 2016 or 2017.
2017 Instructions for Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return (IRS)
The $500 rule that decides when you deposit
If your FUTA tax is more than $500 for the calendar year, you must deposit at least one quarterly payment. You determine when to deposit based on your quarterly tax liability. If your FUTA tax is $500 or less in a quarter, you carry it over to the next quarter. You continue carrying your tax liability over until your cumulative tax exceeds $500, at which point you must deposit your tax by the last day of the month after the end of the quarter. For fourth quarter liabilities, if your FUTA tax for the fourth quarter plus any undeposited amounts from earlier quarters is more than $500, you must deposit the entire amount by January 31. If it is $500 or less, you can either deposit the amount or pay it with your Form 940 by that date.
If your FUTA tax is more than $500 for the calendar year, you must deposit at least one quarterly payment.
2017 Instructions for Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return (IRS)
How each figure was verified
Each number below was read from a stored copy of the document named beside it, and checked to occur word for word in the quoted sentence. The digest is of that stored text.
2017 Instructions for Form 940 (IRS)
- Wage base
This $7,000 is called the FUTA wage base.