SUTA Tax Rate 2025: All You Need to Know

State taxes vary — that includes the State Unemployment Tax Act (SUTA) contribution rates. You should be aware of current rates and understand how the tax is calculated.

What is SUTA tax?

SUTA is a payroll tax required from employers. It’s also known as “state unemployment insurance” (SUI). These taxes are placed in a state’s unemployment fund to pay benefits to employees who have separated from their employer. Neglecting to pay SUTA or SUI taxes can result in:

• fines
• penalty fees
• criminal charges to the employer

While the Federal Unemployment Tax is only paid by the employer, some states require money to be withheld from an employee’s wages in addition to the amounts contributed by the employer for SUTA. Several factors are considered when calculating SUTA rates, including:

• the age of a business
• turnover rate for the industry in which the business operates
• the number of former employees who have filed unemployment claims

Who pays SUTA tax?

In general, employers pay SUTA taxes, but three states have an exception. Here they are, along with their employee tax rates:

• Alaska (0.5%)
• New Jersey (0.425%)
• Pennsylvania (0.07%)

SUTA tax exemptions

Businesses with only a few employees and 501(c)(3) organizations, such as nonprofits and charities, may be exempt from paying SUTA tax. They typically cover the cost of their unemployment claims by reimbursing the state.

If your organization qualifies, you need to submit an application for recognition of exemption.

What if you have employees in multiple states?

For employees who work in only one state, SUTA taxes are paid to the state where the work takes place. For employees who work in two or more states, determining the correct state to pay SUTA can involve identifying the state where the employee has an office or where the employee receives direction from their employer.

In general, if all your employees work in one state, you’ll only pay SUTA taxes to just that state. If your company has employees in multiple states, you’ll submit SUTA tax payments to each applicable state.

An employer’s SUTA rate is often referred to as a contribution rate. The contribution rate is determined by the employer’s experience rating.

Your contribution rate can change annually based on state unemployment agency evaluations. Each state agency will send your company a SUTA rate notice providing a breakdown of how rates are determined.

SUTA tax calculator: How is SUTA calculated?

Most states rely on the reserve ratio method for determining an employer’s experience rating. Employers will pay their contributions into a pre-assigned account, which in turn is used to pay unemployment benefits to the business’s former employees throughout the year. The reserve ratio is calculated as follows:

(the employer’s account balance) / (the employer’s average taxable payroll for usually three years) = (the reserve ratio expressed as a percentage)

The state unemployment agency determines the contribution rates for positive-rated employers and negative-rated employers annually. Employers with a positive reserve ratio are assigned the lowest tax rates, while negative-ratio employers are assigned substantially higher rates.

Visit your applicable state agency’s website for more information.

SUTA Tax Rate and Wage Base 2025

The chart below outlines 2025 SUTA employer tax rate ranges. Keep in mind the wage base is the limit of SUTA tax withholdings.

Don’t forget that some SUTA rates are specific to an employer. Certain industries — like construction or hazardous waste disposal — get a special assessment that impacts their rate. All of these rates are subject to change. Be sure to visit your state’s official government website for complete and finalized information.

Filing and paying SUTA tax

Most states require employers to file annual SUTA tax returns and make quarterly payments. These payments are typically due on the last day of the month following the end of each calendar quarter. It’s essential to note that these deadlines may vary depending on the state(s) in which you operate. Be sure to verify the specific requirements to avoid any potential penalties or fines.

FAQ

What is the SUTA tax rate?

Each state sets its own SUTA tax rate. Certain industries — like construction or hazardous waste disposal — get a special assessment that impacts their rate.

When is SUTA tax due?

Most states require employers to file annual SUTA tax returns and make quarterly payments. These payments are typically due on the last day of the month following the end of each calendar quarter.

How to lower your SUTA tax rate?

Employers can take several steps to lower their SUTA tax rate, including reducing turnover and maintaining a low unemployment claims history.

What is the difference between FUTA and SUTA tax?

FUTA taxes only apply at the federal level, whereas SUTA funds unemployment programs for individual states. Both programs serve a similar purpose and work in tandem to support unemployment initiatives. However, employers and employees may be subject to SUTA taxes. FUTA, on the other hand, only applies to businesses.

What employers are exempt from paying SUTA

Businesses with only a few employees and 501(c)(3) organizations, such as nonprofits and charities, may be exempt from paying SUTA tax.

Does managing state and local tax laws create stress for HR? Paycom’s payroll tax management software helps make the process simple. And to make compliance even easier, download our 2025 HR and Payroll Calendar packed with crucial deadlines and IRS requirements.