SUI (State Unemployment Insurance)
What Is SUI (State Unemployment Insurance)?
State unemployment insurance (SUI) is a tax-funded program to give short-term benefits to workers who have lost their job through no fault of their own, as determined by state law. With the exception of three states (Alaska, New Jersey, and Pennsylvania), SUI is funded entirely by employers.
This tax is required by state and federal law. Unemployed workers receive these benefits on the condition that they’re looking for a new job. The benefits are meant to subsidize the unemployed worker’s basic needs until they find a new job.
Is SUI a Payroll Tax?
Yes, state unemployment insurance is part of what makes up payroll taxes. The specific SUI tax rate varies depending on a state’s requirements. For more information on specific state tax rates, visit your state’s labor department website.
Who Pays For SUI?
Employers are responsible for state unemployment insurance tax for their own employees. The amount of SUI the company pays depends on the SUI rates they’re eligible for. Almost all companies are required by law to pay this tax, but there are some rare exemptions.
Most employees don’t have to pay SUI, except in Alaska, New Jersey, and Pennsylvania.
Who Qualifies for Unemployment Benefits?
SUI is intended for those who become unemployed through no fault of their own. “Fault,” here, is determined by state law. Anyone who quits or is fired for misconduct is not eligible for these benefits, but other workers can be eligible if their situation aligns with the stipulations of state unemployment insurance.
Is My Company Required to Pay Taxes For SUI?
Employers are not required to pay state unemployment insurance tax on wages for an employee who is under the age of 21. Otherwise, almost all companies must pay SUI taxes in any state where the company has employees.
However, some companies are exempt from paying SUI, such as charitable organizations. A charitable organization must generally be a 501(c)(3) to be exempt from the tax, but laws vary by state. 501(c)(3) organizations are also exempt from tax under federal law.
The Difference Between Federal and State Requirements
Unemployment insurance is funded at the federal and state level. Federal contributions to the fund are paid according to the Federal Unemployment Tax Act (FUTA).
Under FUTA, a company must pay unemployment tax on the first $7,000 an employee earns while working at their company. After an employee earns more than $7,000, the company is no longer required to pay the FUTA tax.
As of 2025, the FUTA tax rate is 6% on the first $7,000 (mentioned above). FUTA tax rates vary by year, so it’s important to stay up to date.
Companies must also pay unemployment taxes according to their state requirements. State requirements are dictated by the state government and rates vary depending on location. Most SUI tax rates are 0 to 11%.
SUI Rates: Where to Find Them?
State unemployment insurance tax rates vary by state. You can find these rates on your state’s Department of Labor website. When contacting your local workforce agency, ask for the Employment Security Tax Section to get specific answers about SUI rates within the state.
How Do You Calculate Your Business’s SUI Tax Rate?
State unemployment insurance tax rates vary by state. Each state sets a rate based on:
- Wage base for that state
- Number of former employees who have filed for unemployment benefits
The wage base is the maximum amount of taxable earnings in a calendar year. Each state has a different wage base that may change depending on the year. Your business’s SUI tax rate may increase if more of your former employees have filed for unemployment.
Newer companies get a “new employer rate” for SUI. This rate will change each year, depending on how many employees file a claim. Most new employer rates are 2–42-4%.
Is SUI Tax-Deductible?
Both FUTA and SUI taxes are tax-deductible for employers. Most of these taxes can be entered on line 23 of the Schedule C form when filling out annual tax return forms.