2018 FUTA Wage Base
The 2018 FUTA Wage Base is $7,000.
Effective 2018-01-01Source: 2018 Instructions for Form 940 (IRS)Verified 2026-08-29
Compared with 2017
Every figure on this page is unchanged from 2017.
| Item | 2017 | 2018 | Change |
|---|---|---|---|
| Wage base | $7,000 | $7,000 | +$0 (+0.0%) |
Who it applies to
Employers filing Form 940 (Employer's Annual Federal Unemployment Tax Return)
What changed this year, and why
The FUTA wage base for 2018 is $7,000 per employee.
Common questions
- What is the FUTA wage base for 2018?
- For 2018, the FUTA wage base is $7,000 per employee. Only the first $7,000 of wages paid to each employee in a calendar year is subject to FUTA tax.
The $1,500 quarter test and the 20 week test
An employer must file Form 940 for FUTA tax if it meets either of two tests. The first test asks whether the employer paid wages of $1,500 or more to employees in any calendar quarter during 2017 or 2018. The second test asks whether the employer had one or more employees for at least some part of a day in any 20 or more different weeks in 2017 or 2018. All full-time, part-time, and temporary employees count toward the 20-week test, but partners in a partnership are excluded. Meeting just one of the two tests is enough to trigger the filing requirement. The wage base for FUTA tax in 2018 is $7,000 per employee, which is the maximum amount of each employee's wages subject to the tax during the calendar year.
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 2017 or 2018? • Did you have one or more employees for at least some part of a day in any 20 or more different weeks in 2017 or 20 or more different weeks in 2018?
2018 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 is 6.0% on the first $7,000 paid to each employee during the calendar year. Most employers receive a maximum credit of up to 5.4% against this FUTA tax for state unemployment taxes they pay. This means the employer subtracts the state credit from the 6.0% rate, leaving a smaller net federal rate. The credit is available as long as the employer pays its state unemployment taxes in full and on time, and the state is not a credit reduction state. The wage base for 2018 is $7,000 per employee, so the maximum FUTA tax per employee before any credit is determined by multiplying the 6.0% rate by that $7,000 cap. Employers must figure their tax liability each quarter by determining how much of the first $7,000 of each employee's wages they paid during that quarter.
The FUTA tax is 6.0% (0.060) for 2018. Most employers receive a maximum credit of up to 5.4% (0.054) against this FUTA tax.
2018 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 a state that has not repaid money it borrowed from the federal government to pay unemployment benefits. The Department of Labor determines which states are credit reduction states. If an employer pays wages subject to the unemployment tax laws of a credit reduction state, that employer must pay additional federal unemployment tax when filing Form 940. For 2018, there is one credit reduction state: the U.S. Virgin Islands. Employers who paid wages subject to that state's unemployment compensation laws will have their credit against federal unemployment tax reduced based on the credit reduction rate for that state.
For 2018, there is one credit reduction state (U.S. Virgin Islands).
2018 Instructions for Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return (IRS)
Household employers are tested separately
Household employers are subject to a different filing threshold than other employers. A household employer must pay FUTA tax on wages paid to household employees only if the employer paid cash wages of $1,000 or more in any calendar quarter in 2017 or 2018. A household employee performs household work in a private home, local college club, or local chapter of a college fraternity or sorority. Generally, household employers file Schedule H (Form 1040) instead of Form 940, but if they have other employees in addition to household employees, they can choose to include the household employee FUTA taxes on Form 940 instead. When household employees are included on Form 940, the employer must also file other employment tax returns such as Form 941 or Form 943.
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 2017 or 2018.
2018 Instructions for Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return (IRS)
The $500 rule that decides when you deposit
Employers must deposit their FUTA tax if the total for the calendar year is more than $500. If the FUTA tax for a quarter is $500 or less, the amount is carried over to the next quarter rather than deposited immediately. This carryover continues until the cumulative undeposited tax exceeds $500, at which point the employer must deposit the tax by the last day of the month following the end of that quarter. If the tax for the next quarter is $500 or less, the employer is not required to deposit again until the cumulative amount exceeds $500 once more. For fourth quarter liabilities, if the total FUTA tax plus any undeposited amounts from earlier quarters is more than $500, the entire amount must be deposited by January 31.
If your FUTA tax is more than $500 for the calendar year, you must deposit at least one quarterly payment.
2018 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.
2018 Instructions for Form 940 (IRS)
- Wage base
This $7,000 is called the FUTA wage base.