A taxable wage base limit is the amount of wages that are subject to taxes in a given time period. Once an employee has hit the wage base limit for a tax, the employee and/or employer are no longer responsible for paying that specific tax in the current year.
- Heads up: Wage bases will reset each time an employee gets a new employer.
These common payroll taxes have annual wage base limits per employee:
- Social Security: $160,200 in 2023
- Federal unemployment tax act (FUTA): $7,000 in 2023
- State unemployment insurance (SUI): Varies depending on the state
We'll stop applying a tax for an employee in payroll once the year-to-date wages hit the wage base limit.
At the start of the next year, we'll reset the year-to-date amount so that the tax is applied again until the annual wage base limit is met.
How employees moving states affects wages bases and state unemployment taxes
If an employee moves states, the new state's unemployment wage base limit will apply—this means:
- If the wage base is lower than the state the employee moved from: They won't owe any more SUI taxes in the new state. Employees will not be reimbursed for any SUI taxes already paid to the previous state.
- If the wage base is higher than the state the employee moved from: They'll still have taxes collected up until the higher wage base limit is met—they'll usually receive a credit for the SUI taxes paid on wages earned in the previous state.
- Every state, except Minnesota and Louisiana, currently permits employers to take credit for wages previously paid in other states, when calculating unemployment taxable wages and tax due.