2023 FUTA Wage Base
The 2023 FUTA Wage Base is $7,000.
Effective 2023-01-01Source: 2023 Instructions for Form 940 (IRS)Verified 2026-08-29
Compared with 2022
Every figure on this page is unchanged from 2022.
| Item | 2022 | 2023 | 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, for tax year 2023.
What changed this year, and why
New page describing the 2023 FUTA wage base as published by the IRS in the Instructions for Form 940.
Common questions
- What is the FUTA wage base?
- For 2023, the FUTA wage base is $7,000 per employee. Only the first $7,000 of wages paid to each employee in a calendar year (after subtracting any payments exempt from FUTA tax) is subject to the federal unemployment tax.
The $1,500 quarter test and the 20 week test
An employer must file Form 940 for 2023 if it meets either of two tests during 2022 or 2023. The first is the $1,500 wage test: the employer paid wages of $1,500 or more to employees in any single calendar quarter. The second is the 20-week time test: the employer had one or more employees for at least some part of a day in any 20 or more different weeks. All full-time, part-time, and temporary employees count toward the 20-week test, but partners in a partnership do not. Meeting only one of the two tests is enough to trigger the filing requirement. Employers that answer yes to at least one question must file, and if a business was sold or transferred during the year, each employer that met a test must file its own Form 940.
Who Must File Form 940? 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 2022 or 2023? • Did you have one or more employees for at least some part of a day in any 20 or more different weeks in 2022 or 20 or more different weeks in 2023?
2023 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 2023 is 6.0% applied to the first $7,000 paid to each employee during the calendar year. Most employers can claim a maximum credit of up to 5.4% for state unemployment taxes paid. When the full credit is available, the effective federal rate is significantly reduced. An employer qualifies for the full credit only if it paid all required state unemployment tax by the due date. The credit is calculated separately for each employee based on the portion of the $7,000 wage base paid in each quarter.
The FUTA tax is 6.0% (0.060) for 2023. Most employers receive a maximum credit of up to 5.4% (0.054) against this FUTA tax.
2023 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 U.S. Department of Labor determines which states are credit reduction states. For 2023, there are credit reduction states. If an employer pays wages subject to the unemployment tax laws of a credit reduction state, the employer may have to pay more FUTA tax when filing Form 940. The credit against federal unemployment tax is reduced based on the credit reduction rate for that state. Employers use Schedule A (Form 940) to figure the credit reduction amount.
2. If You Paid Wages in a State That Is Subject to Credit Reduction A state that hasn't repaid money it borrowed from the federal government to pay unemployment benefits is called a credit reduction state.
2023 Instructions for Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return (IRS)
Household employers are tested separately
Household employers face different filing requirements 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 2022 or 2023. 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. However, if a household employer has other employees in addition to household employees, they can choose to include the FUTA taxes for household employees on Form 940 instead of filing Schedule H.
For Employers of Household 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 2022 or 2023.
2023 Instructions for Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return (IRS)
The $500 rule that decides when you deposit
Although Form 940 covers an entire calendar year, employers may need to deposit FUTA tax before filing the return. The deposit requirement is triggered when total FUTA tax for the calendar year exceeds $500. If the tax owed is $500 or less for the year, no deposit is required and the full amount can be paid with the return. When deposits are required, employers must track their quarterly tax liability. If FUTA tax for a quarter is $500 or less, it carries over to the next quarter. This accumulation continues until the cumulative undeposited tax exceeds $500, at which point the employer must deposit the accumulated amount by the last day of the month following the end of that quarter.
If your FUTA tax is more than $500 for the calendar year, you must deposit at least one quarterly payment.
2023 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.
2023 Instructions for Form 940 (IRS)
- Wage base
This $7,000 is called the FUTA wage base.