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FUTA Tax and Credit Reduction Calculator (Form 940)

What does this come to under the current IRS rules?

FUTA tax at 6.0 percent less the 5.4 percent credit, plus the additional tax on wages paid in a credit reduction state.

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Your figures
Example figuresIllustrative only. Type over them with your own.
Total FUTA tax
$3,360
FUTA tax before credit (6.0%)
$21,000
Maximum credit (5.4%)
$18,900
Drawn to one scale
Total FUTA tax$3,360
FUTA tax before credit (6.0%)$21,000
Maximum credit (5.4%)$18,900
FUTA tax after maximum credit (0.6%)$2,100
Additional tax from credit reduction$1,260
All results
MeasureResult
Total FUTA tax$3,360
FUTA tax before credit (6.0%)$21,000
Maximum credit (5.4%)$18,900
FUTA tax after maximum credit (0.6%)$2,100
Additional tax from credit reduction
Form 940 line 11, from Schedule A
$1,260
How this was worked out
Work shownrecomputed as you type
FUTA tax = 6.0% x FUTA taxable wages
Maximum credit = 5.4% x FUTA taxable wages, so the rate after credit is 0.6%
Credit reduction = credit reduction rate x FUTA wages paid in that state

Illustrative arithmetic on the figures you enter. Check the result against your firm's methodology before relying on it.

The formulas

  • FUTA tax = 6.0% x FUTA taxable wages
  • Maximum credit = 5.4% x FUTA taxable wages, so the rate after credit is 0.6%
  • Credit reduction = credit reduction rate x FUTA wages paid in that state

How it works

Publication 15 sets the 2026 FUTA rate at 6.0 percent on the first $7,000 of wages per employee, with a credit of up to 5.4 percent for state unemployment tax, leaving 0.6 percent. The full credit requires state tax paid in full, on time and on the same wages, and a state that is not a credit reduction state.

A credit reduction state has not repaid federal unemployment loans. Employers paying wages subject to its unemployment law pay additional FUTA tax figured on Schedule A (Form 940), entered on Form 940 line 11 and included with the fourth quarter deposit. Wages excluded from state unemployment tax and late state payments reduce the credit through Form 940 lines 9 and 10, which this tool does not cover.

Illustrative figures only. Check the result against your firm's methodology before relying on it.

Common questions

Which states are credit reduction states?

The Department of Labor determines them for each year, and Schedule A (Form 940) lists them with their rates.

When is the credit reduction amount due?

With the fourth quarter deposit; it may be deposited earlier in the year, but it is treated as incurred in the fourth quarter.

Sources

Runs in your browser. The figures you type are not sent to CORAA or stored. Check the result against your firm's methodology before relying on it.

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