---
title: "Federal Unemployment Tax Act (FUTA) & Benefit Cost Rate (BCR)"
slug: "federal-unemployment-tax-act-futa-benefit-cost-rate-bcr"
updated: 2026-07-07T18:18:18Z
published: 2026-07-07T18:18:18Z
canonical: "help.wrapbook.com/federal-unemployment-tax-act-futa-benefit-cost-rate-bcr"
stale: true
---

> ## Documentation Index
> Fetch the complete documentation index at: https://help.wrapbook.com/llms.txt
> Use this file to discover all available pages before exploring further.

# Federal Unemployment Tax Act (FUTA) & Benefit Cost Rate (BCR)

## Federal Unemployment Tax Act (FUTA)

FUTA is a federal law that requires employers to pay a tax on the first $7,000 of each employee's wages. This tax helps fund the federal unemployment insurance program, which provides benefits to workers who lose their jobs.

- The nominal tax rate is 6.0%, but employers typically receive a credit of up to 5.4% for state unemployment tax contributions
- This lowers the effective rate to about 0.6% per employee, or a maximum of $42 per employee annually
- FUTA taxes help fund state workforce agencies and unemployment benefit programs
- As an employer, you're responsible for paying this tax - it is not withheld from employee wages
- For federal government information about FUTA, see [IRS, Federal Unemployment Tax](https://www.irs.gov/individuals/international-taxpayers/federal-unemployment-tax)

## Benefit Cost Rate (BCR)

BCR is a supplemental tax that gets added to the FUTA tax in specific circumstances. When a state has outstanding federal unemployment loans for five or more consecutive years, the BCR is applied as an additional tax rate.

- The BCR is triggered when states carry federal unemployment insurance loan balances for five or more consecutive years
- The BCR increases the FUTA tax rate to encourage timely repayment of federal advances
- This is a mandatory tax that all employers must pay - it's not optional
- Individual companies cannot be exempted from this tax
- All payroll providers are required to collect this tax on all qualifying wages in the affected states
- For federal government information about BCR, see [DOL, FUTA Credit Reduction](https://oui.doleta.gov/unemploy/futa_credit.asp)

### BCR Updates for 2026

Effective March 31, 2026, BCR tax of 3.8% will be applied to wages for California-based workers, up to the FUTA wage base of $7,000 per year. When applicable, BCR tax will be itemized on the payroll invoice.

**This BCR tax impacts your production company if:**

- You have employees working in California in 2026

**Potential Waiver & Refund**

As with prior tax years, the U.S Department of Labor may waive BCR tax for the State of California. **In the event a waiver is provided, Wrapbook will automatically refund BCR taxes collected in 2026**.