Payments Exempt from FUTA Tax

Certain types of payments are exempt from FUTA tax, including:

1. Fringe benefits, such as:

  • Meals and lodging
  • Contributions to accident or health insurance plans for employees, including certain employer payments to a Health Savings Account or an Archer MSA.
  • Payment for benefits excluded under section 125 (cafeteria plans).
    • A Cafeteria Plan is a plan that offers flexible benefits under IRC section 125. Employees choose their benefits from a menu of cash and benefits, some of which can be paid for with pretax deductions from wages.
  • Employer reimbursements for qualified moving expenses, to the extent that these expenses would otherwise be deductible by the employee.

2. Group term life insurance.

3. Retirement/pension plan contributions made by the employer on behalf of employees to a qualified plan are exempt from FUTA tax. Such plans include:

  • A SIMPLE retirement account
  • A 401(K) plan

An employee's salary reduction contributions to a SIMPLE are subject to FUTA taxes. Keep in mind, FUTA taxes are an employer-paid tax; employees do not pay FUTA taxes.

4. Dependent care, such as:

  • Payments up to $5,000, per employee, ($2,500 if married filing separately) for a qualifying person's care.
  • Payments made under workers' compensation law because of a work-related injury or sickness.
  • See section 6 of Pub. 15-A, Employer's Supplemental Tax Guide

6. Other payments exempt from FUTA tax:

  • All non-cash payments and certain cash payments for agricultural labor, and all payments to H-2(A)visa workers.
    • See Publication 51, Agricultural Employer's Tax Guide
  • Payments for domestic services if you did not pay cash wages of $1,000 or more (for all domestic employees) in any calendar quarter in 2013 or 2014.
    • Publication 926, Household Employer's Tax Guide.
  • Payments for services provided to you by your parent, spouse, or child under the age of 21.
    • See section 3 of Pub. 15 (Circular E), Employer's Tax Guide.
  • Payments for certain fishing activities.
    • See Publication 926, Household Employer's Tax Guide
  • Payments to certain statutory employees.
    • See section 1 of Pub. 15-A, Employer's Supplemental Tax Guide.
  • Payments to nonemployees who are treated as your employees by the state unemployment tax agency.