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FUTA Offset

The Federal Unemployment Tax Act (FUTA) imposes a tax on employers which provides funds to states to operate public employment offices and pay unemployment insurance benefits to qualified claimants. The FUTA tax rate was 6.20% until June 30, 2011. As of July 1, 2011, the rate decreased to 6.0 %. Employers who file and pay their state unemployment tax timely receive up to a 5.4% credit against their federal tax.

Kentucky’s Unemployment Insurance Trust Fund became insolvent in 2009, and the Commonwealth has had to use federal loans to pay benefits. Since we continued to have outstanding loans for two consecutive years, employers will incur a .3% reduction in the amount of credit they can take against their Annual Federal Unemployment Tax (credit will decrease from 5.4% to 5.1%). This credit reduction will increase by .30% each year the balance remains unpaid. Please refer to the chart for your credit reduction amount each year until the loan balance has been paid in full.

Maximum Allowable Credit
Year Due Date Credit
2011January 20125.10%
2012January 20134.80%
2013January 20144.50%
2014January 20154.20%
2015January 20165.40%
2016January 20175.40%
2017January 20185.40%
2018January 20195.40%
2019January 20205.40%
2020January 20215.40%
2021January 20225.40%
2022January 20235.40%
2023January 20245.40%