In this article, we'll discuss the federal and state unemployment tax rate for Connecticut employers in 2025. Employers should also familiarize themselves with the other 2024 federal and state labor law updates for Connecticut employers.
Connecticut FUTA Rates
According to the U.S. Department of Labor, on November 10, 2022, Connecticut became a Federal Unemployment Tax Act (FUTA) credit reduction state.
Standard FUTA Rates
Generally, the standard FUTA tax rate is 6.0% on the first $7,000 of wages subject to FUTA. Employers would receive a universal credit of 5.4% when they file their Form-940. This will result in a net FUTA tax rate of 0.6%.
FUTA Credit Reduction
However, like many other states, Connecticut had an outstanding balance of the Federal Unemployment Trust Fund loans, which were borrowed from the federal government to pay the Unemployment Insurance benefits for residents of CT during the pandemic.
If a state has outstanding loan balances on January 1 for two consecutive years and does not repay the full amount of its loans by November 10 of the second year, the FUTA credit rate (5.4%) for employers in that state will be reduced until the loan is repaid.
Net FUTA Rate for Connecticut Employers in 2024
Connecticut became a Federal Unemployment Tax Act (FUTA) credit reduction state on November 10, 2022, due to the outstanding loan balance, and was applied with a 0.3% FUTA credit rate reduction for 2023. This resulted in a 0.3% increase in their FUTA rate:
- 2023 FUTA rate for a non credit reduction state: 6.0% - 5.4% = 0.6%
- 2023 FUTA rate for Connecticut = 6.0% - (5.4% - 0.3%) = 0.9%
As of January 1, 2024, Connecticut's outstanding loan balance was still not paid off. If the loan balance is not paid out by November 10, 2024, employers in Connecticut are subject to an additional 0.3% reduction of their FUTA credit:
- 2024 FUTA rate for a non credit reduction state: 6.0% - 5.4% = 0.6%
- 2024 FUTA rate for Connecticut = 6.0% - (5.4% - 0.3% - 0.3%) = 1.2%
Employers in Connecticut will have to pay an additional 0.3% in federal unemployment tax for wages paid to employees, based on the FUTA taxable wage base of $7,000 for 2025.
It is unclear as to whether or not Connecticut will continue to be a FUTA credit reduction state in 2025.
2025 CT SUTA Tax Rate
In 2025, the state of Connecticut continued its effort to support CT employers as well as promote long-term UI Trust Fund solvency, by reducing the state unemployment tax rate to mitigate the impact of the federal tax credit reduction. The following Connecticut SUTA tax changes are effective as of January 1, 2025:
- The taxable wage base (TWB) increases from $25,000 to $26,100 and will keep increasing each year moving forward due to inflation.
- The state’s new employer rate decreases from 2.5% to 2.2%.
- The state’s minimum charged rate is 0.1%.
- The state’s maximum charged rate is 10.0%.
- To minimize the short-term impact of the TWB increase, charged rates in calendar year 2025 will be reduced by 1.269. As such, the state’s maximum charged rate for calendar year 2025 will be reduced to 7.9%.
- The state’s fund solvency tax rate is 1.0%.
- The minimum and maximum contribution rates for 2025 will be 1.1% and 8.9%, respectively.
Navigate Through Federal & State Unemployment Tax
Navigating the federal and state payroll taxes is not an easy task. Connecticut employers can consult with a CT payroll provider for personalized guidance and support to ensure compliance with payroll taxes. It is also important to be caught up on Connecticut Minimum Wage before processing payroll or collecting state payroll taxes.
Aside from payroll tax updates, there are several federal labor law changes in 2024. Employers need to understand how these changes may affect their business and employees while making necessary adjustments to meet the new compliance requirements.
