Federal Unemployment Tax Act (FUTA) Updates for 2026

Update 3.27.26: Final Update for 2025 – Refunds Coming for Some Clients

California received a Benefit Cost Rate (BCR) waiver, and both New York and Connecticut repaid their federal UI loans before the November 10th deadline. As a result, GreenSlate will be issuing refunds for previously billed FCR and BCR amounts in those states. Account reconciliation is underway and clients will be contacted in March 2026.

Learn more.

➡️ 2026 FUTA Updates
➡️ 2025 FUTA Updates

What is FUTA tax? 

FUTA, Federal Unemployment Tax Act, is a federal employer-paid payroll tax that provides vital funding for state unemployment insurance (SUI) programs across the U.S. and is reported on Form940. 

With the mass unemployment that resulted from the COVID-19 pandemic, many states had to borrow from the Federal government in order to pay unemployment benefits. As a result, a few states still have outstanding loans to the government that will result in higher FUTA taxes being paid by employers in those states in 2026. Understanding the new FUTA rates and credit reductions is key for accurate budgeting and compliance.

2026 FUTA Updates

The 2026 FUTA, FCR, and BCR rates: 

* Maximum FUTA tax per employee per project per year.

How can employers calculate their 2026 FUTA liability? 

Employers should assume a .6% FUTA rate on the first $7,000 in wages for all states with an additional percentage to be charged to cover the FUTA Credit Reduction (FCR) and BCR Add-On rate (BCR).

Review your payroll records to identify employees subject to FUTA, and adjust your budgets to reflect the increased rates in the affected states. Learn more about FUTA credit reductions.

2025 FUTA Updates

Understanding the 2025 FUTA Credit Reduction

Under normal circumstances, employers are subject to a federal FUTA tax rate of 6.0%. However, they typically receive a standard credit of up to 5.4%, resulting in a net effective FUTA rate of just 0.6%.

When a state is forced to carry a federal UI loan for two or more consecutive years and fails to repay it by November 10th of the second year, employers in that state lose a portion of that tax credit. The credit is reduced by 0.3% annually until the state's loan is fully repaid, which in turn raises the employer's net tax rate.

Final 2025 FUTA Credit Reduction Rates

Because California and the Virgin Islands did not meet the November deadline, the following final rates and maximum per-employee tax amounts (based on the $7,000 FUTA wage base) apply for 2025:

2025 FCR, FUTA, and Maximum FUTA Tax per employee:

What The Final 2025 Rates Mean for GreenSlate Clients

In early 2025, GreenSlate proactively billed clients for the anticipated FUTA Credit Reduction (FCR) and Benefit Cost Rate (BCR) per our March 2025 communications.

However, thanks to late-year developments, we have some positive news and upcoming refunds for many of our clients:

• California BCR Waiver: California was officially granted the Benefit Cost Rate (BCR) waiver for 2025. Because of this, GreenSlate will refund the 3.70% BCR amount that was previously charged to clients for the year.

• New York & Connecticut Loan Repayments: Both Connecticut and New York successfully paid off their federal UI loans in full prior to the November 10th deadline. As a result, clients are no longer subject to the penalty. GreenSlate will refund the previously assessed FCR and BCR add-on amounts for these two states.

Final 2025 account reconciliation is currently underway and eligible clients will be contacted about any refunds they are due by mid-April.  

Navigating payroll for your production? Specialized production payroll support, from platforms like GreenSlate, can help avoid under, or over, accruing taxes. 

Contact our Sales team to streamline your production payroll today. 

This information in this communication is general in nature, and is not intended, nor should it be construed, as legal, accounting, tax or other professional advice rendered by GreenSlate, LLC. The reader should contact his or her attorney, CPA, or tax professional prior to taking any action based upon this information.