A taxable wage base limit is the maximum amount of an employee's earnings that are subject to a particular type of payroll tax. This limit determines the maximum income on which an employer and employee must pay the tax. Once an employee's earnings exceed this limit, they are no longer subject to that specific tax for the remainder of the tax year. The limit is often adjusted annually based on inflation or other economic factors.
Common payroll taxes with 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 by state
Impact of Employee State Moves on Wage Bases and State Unemployment Taxes:
- New state's unemployment wage base limit applies.
- If lower than the former state, no more SUI taxes owed, no reimbursement.
- If higher, taxes collected up to the new limit—credit for SUI taxes paid in the previous state.
Most states (except MN and LA) allow wage credits across states when calculating unemployment taxable wages and tax owed.
Disclaimer: This article is not financial, legal, or HR advice. Regulations change, so consult experts for guidance.