What is the maximum annual wage base subject to FUTA tax in 2024?
Correct Answer
B) $7,000
The FUTA wage base has remained at $7,000 per employee per year for many years. Employers pay 0.6% FUTA tax on the first $7,000 of each employee's wages annually.
Why This Is the Correct Answer
The FUTA (Federal Unemployment Tax Act) wage base has been set at $7,000 per employee per year since 1983 and has not changed despite inflation adjustments to other tax bases. This is a fixed amount that contractors must know for payroll tax calculations. Employers pay 0.6% FUTA tax on only the first $7,000 of each employee's annual wages, making this a relatively small but important tax obligation.
Why the Other Options Are Wrong
Option A: $142,800
$142,800 is the 2024 Social Security wage base limit, which is a completely different tax with a much higher threshold that gets adjusted annually for inflation.
Option D: $160,200
$160,200 is the 2024 Medicare wage base limit for the additional 0.9% Medicare tax, which applies to high-income earners and is unrelated to FUTA.
Memory Technique
Remember 'FUTA is FINITE at 7' - FUTA tax stops at exactly $7,000 per employee, unlike other employment taxes that have much higher limits
Reference Hint
Look up payroll taxes or employment tax obligations in your business law or construction business management reference materials
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