What is a wage base in payroll?

A taxable wage base limit is the maximum amount of your earnings that are subject to taxes within a certain time frame. When you reach this limit for a specific tax, neither you nor your employer need to pay that particular tax for the rest of the year.

Keep in mind that if you change jobs, the wage base limit starts fresh with your new employer.

For common payroll taxes in 2023:

• Social Security tax stops being collected when you earn $160,200.
• Federal unemployment tax (FUTA) stops at $7,000.
• State unemployment insurance (SUI) limits vary by state.

We'll stop deducting a tax from your paycheck once your year-to-date earnings reach the wage base limit. But don't worry, at the beginning of the next year, we reset the count, and the tax applies again until you reach the annual wage base limit.

If you move to a different state:

• If the new state's wage base is lower than the one you moved from, you won't owe more SUI taxes in the new state. You won't get a refund for SUI taxes paid in your previous state, though.
• If the new state's wage base is higher, you'll keep paying taxes until you hit the higher wage base limit. Usually, you get a credit for the SUI taxes you paid on wages in your previous state.

Almost every state, except Minnesota and Louisiana, lets employers consider wages paid in other states when calculating unemployment taxes. This ensures you don't get taxed twice on the same income.