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State unemployment taxes

State unemployment taxes refer to taxes that are imposed on the employer by states that provide benefits to employees who lose their jobs.

All states have unemployment compensation programs under state unemployment tax acts (SUTA). Like federal unemployment taxes, state unemployment taxes provide benefits to employees who lose their jobs. These taxes are levied on employers. The basic rate is usually 5.4% on the first $7,000 of wages paid to an employee during the year. The state adjusts the basic rate according to the employers’ experience rating: Companies with a history of unstable employment may pay more than the basic rate. Regardless of the rate paid, the company’s credit on the federal unemployment tax is still 5.4%.

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