FUTA Credit Reduction States for 2025

States that have borrowed from the federal government to cover unemployment claims but have not repaid this amount by November 10, 2025, have their FUTA credit reduced. The Department of Labor named one states—California—as credit reduction states for purposes of federal unemployment tax (FUTA). Instead of the usual credit of 5.4% against the FUTA tax rate of 6.0% (so that the rate is 0.6%) on the first $7,000 of annual wages, employers in California will have a credit of only 4.2% (so that the rate is 1.8%). As a result, instead of the usual FUTA tax of $42 per employee annually, California employers will pay $126 per employee for 2025. The FUTA tax return—Form 940—for 2025 is due on February 2, 2026. #IdeaoftheDay