Employer-Only Payroll Taxes: FUTA, SUTA and What Else

The main payroll tax paid only by employers, with no employee share, is the Federal Unemployment Tax (FUTA). State unemployment insurance tax (SUTA) is generally employer-paid as well. Social Security and Medicare are split evenly, and the Additional Medicare Tax is the reverse case: withheld from employees with no employer match.

If you're budgeting for a new hire, reviewing a payroll register or explaining to a manager why some taxes never show up on a pay stub, this is the breakdown you need.

Key takeaways

• The IRS states that only the employer pays FUTA; it's never deducted from wages.
• FUTA is 6.0% on the first $7,000 of each employee's annual wages, minus a credit of up to 5.4% for paying state unemployment tax on time.
• In states without a credit reduction, the net FUTA rate is generally 0.6%, or at most $42 per employee per year.
• Social Security (6.2% each) and Medicare (1.45% each) are shared, not employer-only.
• The Additional Medicare Tax of 0.9% has no employer match.

Which payroll taxes are employer-only?

Federal Unemployment Tax (FUTA)

The IRS is blunt about it: "Only the employer pays FUTA tax; it is not deducted from the employee's wages." Its employment tax overview adds that employers pay FUTA only from their own funds. These taxes apply to employees, not true contractors, so it pays to confirm whether a worker is an employee or contractor first.

The U.S. Department of Labor explains the math. FUTA is 6.0% of taxable wages, and the taxable wage base is the first $7,000 paid to each employee in a calendar year. Employers who pay state unemployment taxes on time get an offset credit of up to 5.4%, whatever rate they actually paid the state. That leaves a net rate of generally 0.6% in states not subject to a credit reduction. On a $7,000 wage base, that's $42 per employee per year.

Not every employer owes FUTA. Under IRS Publication 15's general test, you're subject to FUTA in 2026 if you paid wages of $1,500 or more in any calendar quarter in 2025 or 2026, or had at least one employee for some part of a day in 20 or more different weeks in either year. Separate tests apply to household and farm employers.

Some wages are also outside FUTA altogether, according to Publication 15:

• Pay to state and local government employees.
• Pay to a child under 21 working for a parent.
• Pay to a person working in their spouse's trade or business (which is still subject to Social Security and Medicare).

You report FUTA annually on Form 940. Deposits happen quarterly once the liability builds up; Publication 15 lists due dates such as April 30 for the January to March quarter, July 31 for April to June and October 31 for July to September.

State Unemployment Insurance Tax (SUTA)

The Department of Labor describes unemployment insurance as "jointly financed through Federal and state employer payroll taxes." Each state sets its own tax rates and its own taxable wage base, and those vary a lot from state to state. Keep each state's current rate notice on file and update payroll whenever a new one arrives.

Most of the cost sits with the employer, but don't assume every state works the same way. Before you configure payroll in a new state, check that state's unemployment agency for whether any employee contribution applies, what the wage base is and how often you file.

One detail catches people out. Publication 15 notes that some states exclude certain wages from state unemployment tax even though they're subject to FUTA, such as wages paid to corporate officers or certain fringe benefits. In that case you may owe more than 0.6% FUTA on those wages.

Other employer-funded costs

Some states add surcharges or assessments collected alongside unemployment tax. Workers' compensation insurance isn't a payroll tax, but it's another employer cost that belongs in the same budget line. Build a state-by-state list so nothing is missed at renewal time.

How do shared payroll taxes compare?

Tax	Employer pays	Employee pays	Notes
FUTA	Yes	No	6.0% on first $7,000, less state credit of up to 5.4%
State unemployment	Yes	Generally no; check each state	Rates and wage bases set by each state
Social Security	6.2%	6.2%	2026 wage base $184,500
Medicare	1.45%	1.45%	No wage base limit
Additional Medicare Tax	No match	0.9%	Employer withholds on wages over $200,000 in a calendar year
Federal income tax	No	Yes	Employer withholds and remits based on Form W-4

The Social Security, Medicare and Additional Medicare figures come from IRS Topic 751. Even for taxes withheld from employees, the employer is responsible for collecting and depositing them on time. Our guide to payroll tax deposit schedules explains the monthly and semiweekly rules.

Why does the distinction matter for payroll and finance?

• Budgeting: Employer-only taxes are part of the fully loaded cost of each hire, on top of gross pay and the employer share of FICA.
• Pay stubs: Employer-only taxes don't appear as deductions on a paycheck, which often confuses new managers reading payroll registers.
• Cash flow: Because the FUTA wage base is only $7,000, most of the cost lands early in the year and drops once employees pass the base. Many state wage bases behave the same way.
• Multi-state complexity: Each state has its own rate notice, wage base and filing schedule. See our guide to multi-state payroll with conflicting tax rules.

If you're newer to payroll, our explainer on income tax versus payroll tax covers the basic categories. And if you employ public-sector, student or visa-holder workers, our guide to which US workers aren't covered by Social Security explains the exceptions on the FICA side.

Common mistakes with employer-only taxes

• Setting up FUTA or employer SUTA as an employee deduction.
• Keeping last year's SUTA rate after a new rate notice arrives.
• Missing a state registration when your first remote employee starts in a new state.
• Paying state unemployment tax late, which puts the full FUTA credit at risk.
• Forgetting that credit reduction liabilities are added to the fourth quarter FUTA deposit.
• Assuming every wage type counts the same for FUTA and SUTA.

FAQ

Is FUTA ever withheld from an employee's paycheck?

No. The IRS states that only the employer pays FUTA and that it isn't deducted from employee wages. If FUTA shows up as an employee deduction on a pay stub, the payroll setup is wrong. Correct it right away and review any amounts already withheld with your payroll provider or tax advisor so affected employees can be repaid.

Do employees pay any state unemployment tax?

Generally no. The Department of Labor describes unemployment insurance as financed through employer payroll taxes, and each state sets its own rules. Because those rules differ, check each state's labor or workforce agency where you have employees for current rates, wage bases and any employee contribution before you configure payroll.

Is the employer share of Social Security an employer-only tax?

Not really. The employer pays 6.2% for Social Security and 1.45% for Medicare, but employees pay matching amounts, so these are shared taxes. FUTA and state unemployment tax are the true employer-only payroll taxes in most cases, while the 0.9% Additional Medicare Tax is employee-only, with no employer match.

What to do next

• List every state where you have employees and confirm each one's current unemployment tax rate and wage base.
• Check that FUTA and employer SUTA are set up as employer liabilities, not deductions, in your payroll system.
• Add Form 940 and the quarterly FUTA deposit dates to your compliance calendar. Our small business tax day checklist can help you organize the rest.
• Include FUTA and SUTA when you calculate the fully loaded cost of each new hire.

Last reviewed: October 2026.

Sources

• Federal unemployment tax, Internal Revenue Service
• Unemployment Insurance Tax Topic, U.S. Department of Labor
• Topic no. 751, Social Security and Medicare withholding rates, Internal Revenue Service
• Publication 15, Employer's Tax Guide, Internal Revenue Service