What Is the SUI Tax on My Paycheck?
Understand the SUI tax on your paycheck. Learn why State Unemployment Insurance appears as a deduction and what this specific payroll item means for your earnings.
State Unemployment Insurance (SUI) tax is a payroll tax that funds unemployment benefits for eligible workers. While primarily paid by employers, certain states also require employee contributions, which can appear as a deduction on a paycheck. This tax helps provide a financial safety net for individuals who lose their jobs through no fault of their own.
Understanding State Unemployment Insurance
State Unemployment Insurance (SUI) tax is a state-level payroll tax designed to fund unemployment compensation for workers. This system operates distinctly from the Federal Unemployment Tax Act (FUTA), which is a federal tax on employers to help fund state unemployment agencies. Each state manages its own SUI program, setting specific rates and eligibility requirements within federal guidelines.
The primary purpose of SUI is to offer temporary financial assistance to eligible workers who become unemployed involuntarily. The funding for these unemployment benefits predominantly comes from taxes imposed on employers.
Why You See SUI on Your Paycheck
Although SUI is primarily an employer-funded tax in most states, a few specific states mandate or permit employees to contribute to their state’s unemployment insurance fund. When an employee works in one of these particular states, a deduction for SUI may appear on their paycheck. This direct employee contribution is relatively uncommon across the United States.
States that require employee SUI contributions include Alaska, New Jersey, and Pennsylvania. In Alaska, employees contribute a fixed rate to SUI, which is deducted from their wages. Pennsylvania also mandates employee contributions, with a specific percentage of gross taxable wages withheld for SUI. New Jersey requires employee contributions for its Temporary Disability Insurance (TDI) and Family Leave Insurance (FLI) programs, which are often grouped with or related to unemployment contributions.
How SUI Contributions Are Calculated
SUI contributions, particularly for employees, are calculated based on two main components: the taxable wage base and the SUI tax rate. The taxable wage base represents the maximum amount of an employee’s annual wages subject to the SUI tax. This wage base varies significantly by state and is often adjusted annually. For instance, in 2025, Alaska’s taxable wage base for SUI is $51,700, while New Jersey’s taxable wage base for TDI/FLI is $165,400 for employee contributions. Pennsylvania’s employee contributions apply to all gross taxable wages, meaning there is no wage limit for employee SUI in that state.
The SUI tax rate is a percentage applied to the employee’s wages up to the taxable wage base. This rate is set by each state and can also vary. For example, in 2025, Alaska’s employee SUI rate is 0.50%. Pennsylvania’s employee SUI withholding rate is 0.07% of gross taxable wages. New Jersey’s employee contribution rate for Temporary Disability Insurance is 0.23% of wages up to its specific taxable wage base.
What SUI Funds
The funds collected from SUI taxes, whether from employers or, in some states, from employees, are directed into a state’s unemployment trust fund. These trust funds are established to hold and manage the revenue generated from SUI contributions. Their purpose is to provide unemployment benefits to eligible individuals.
When a worker loses their job through no fault of their own and meets state-specific eligibility criteria, they can apply for unemployment compensation. The payments received by these unemployed individuals are drawn directly from the state’s unemployment trust fund. This system functions as a financial safety net, offering temporary income support to help individuals sustain themselves and their families while actively seeking new employment. The goal is to provide economic stability during periods of unemployment and support broader economic resilience.