FUTA and State Unemployment Tax for Household Employers
Federal unemployment tax (FUTA) applies once you've paid a household employee $1,000 or more in any calendar quarter — typically 0.6% of the first $7,000 in wages for the year, as long as you also pay your state unemployment tax on time. Many states layer their own unemployment tax on top, with different rates and rules.
How FUTA works
The federal unemployment tax rate is technically 6% on the first $7,000 of wages, but most employers who pay their state unemployment tax on time get a 5.4% credit — bringing the effective rate down to 0.6%, or a maximum of $42 per employee per year.
It kicks in once you've paid $1,000 or more to a household employee in any single calendar quarter — not the same $3,000/year threshold that triggers FICA.
State unemployment tax
Most states also require household employers to register for state unemployment insurance and pay a state-level tax, often quarterly, with a rate that's frequently based on your "new employer" status until you have a claims history.
Rates and rules vary significantly by state — see our state coverage page for what's verified for your state.
Why unemployment tax exists here at all
It funds unemployment benefits your employee could draw on if the job ends and they're eligible — one of several reasons paying above the table protects your employee, not just you.
Frequently asked questions
Do I pay FUTA even if my employee never files for unemployment?
Yes — it's a tax you owe based on wages paid, not contingent on the employee ever using unemployment benefits.
What if I'm under $1,000 in every quarter but over $3,000 for the year?
Then FICA still applies (based on the annual threshold) but FUTA may not, since FUTA has its own separate quarterly test.
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Know what you owe before the quarter ends.
Sadie tracks your quarterly and annual totals as you record paydays, so FUTA and state unemployment don't sneak up on you.
This guide is general information, not tax or legal advice. Rules vary by state and change over time — confirm anything specific to your situation with a licensed professional or your state's labor department.