How to Calculate Illinois Unemployment Tax: Wage Base and Rates

To calculate Illinois unemployment tax, multiply each employee’s wages up to the annual taxable wage base by your assigned contribution rate, then add the results together for the quarter. For 2026, the taxable wage base is $14,250 per employee, and most new employers pay a rate of 3.350%.1Illinois Department of Employment Security. 2026 State Experience Factor and Employers UI Contribution Rates The tax is paid entirely by the employer; nothing is withheld from employee paychecks.2Illinois Department of Employment Security. Unemployment Insurance Information

The Two Numbers You Need

The 2026 Taxable Wage Base

The taxable wage base caps how much of any single employee’s earnings you pay tax on in a year. For 2026 that cap is $14,250.3Illinois General Assembly. Unemployment Insurance Act Once a worker’s year-to-date pay crosses that line, the rest of their wages for the year are not subject to Illinois unemployment tax. The figure adjusts annually, so confirm it before your first-quarter filing each year.

Your Contribution Rate

Your rate is the percentage you apply to taxable wages, and it depends on how long you’ve been in the system.

  • Most businesses that became liable on or after January 1, 2024 pay the standard new-employer rate of 3.350%. A few industry sectors pay slightly more based on their NAICS code; administrative support and waste management, for example, pay 3.450%.1Illinois Department of Employment Security. 2026 State Experience Factor and Employers UI Contribution Rates
  • Businesses with total gross wages under $50,000 pay a flat 5.4%.4Illinois Department of Employment Security. 2026 Historical Rate Chart
  • After three or more years of history, you move to an experience rating based on how many unemployment claims former employees have filed against your account. More claims mean a higher rate the next year.5Illinois Department of Employment Security. Annual Employer Contribution Tax Rates

IDES mails a Notice of Contribution Rate each year listing your assigned percentage and your account number. Both numbers are needed to file, so keep the notice with your payroll records.

Running the Calculation

The math is simple multiplication. The tracking is where mistakes creep in, because you have to watch each employee’s year-to-date wages against the $14,250 cap.

Step 1. For each employee, look at their cumulative earnings for the year. Only the portion at or below $14,250 counts as taxable wages.3Illinois General Assembly. Unemployment Insurance Act If a worker earned $10,000 in Q1 and $8,000 in Q2, their Q2 taxable wages are $4,250, not $8,000, because that’s all that fits before the cap.

Step 2. Add the taxable wages across every employee for the quarter. Anyone who already crossed $14,250 in an earlier quarter contributes zero for the rest of the year.

Step 3. Multiply the quarterly total by your assigned rate. That’s what you owe.

A worked example. You have five employees who each earn $5,000 in Q1, and your rate is 3.350%. Nobody is close to the cap, so all $25,000 is taxable. $25,000 × 0.0335 = $837.50 for Q1. In Q2, each employee earns another $5,000, bringing year-to-date pay to $10,000 apiece, still under the cap. Another $25,000 taxable, another $837.50 due.

Change the facts. Say one employee earns $15,000 in Q1 alone. Only $14,250 of that pay is taxable, and it’s all taxable in Q1. You owe nothing on that worker in Q2, Q3, or Q4. Good payroll tracking should show their taxable wages dropping to zero the moment they cap out.

Filing and Paying by Quarter

You file wage reports and pay through the MyTax Illinois portal, entering each employee’s wages for the quarter and paying by bank debit.6Illinois Department of Employment Security. MyTax Illinois: Report and Pay Unemployment Insurance Taxes Reports and payments are due by the last day of the month after each quarter ends:

  • Q1 (January–March): April 30
  • Q2 (April–June): July 31
  • Q3 (July–September): October 31
  • Q4 (October–December): January 31

Save the confirmation number the portal generates. IDES cross-references quarterly reports with federal filings, so gaps between what you report to the state and what you report to the IRS can invite questions.

What Late Payment Costs

Interest on unpaid contributions runs at 2% per month, calculated daily from the due date.7Illinois Department of Employment Security. Illinois Unemployment Insurance Law Handbook Late wage reports carry a separate penalty: $5 for every $10,000 in total wages (or fraction of that amount) for each month or partial month the report is overdue, capped at $2,500 per month, with a $50 minimum per period. If IDES tells you a submitted report is insufficient and you don’t fix it within 30 days, the same penalty structure starts again.

How the Federal Credit Depends on Your State Payment

Every employer also owes federal unemployment tax under FUTA. The federal wage base is $7,000 per employee per year and the gross FUTA rate is 6.0%.8Internal Revenue Service. Topic No. 759, Form 940 – FUTA Tax Return Filing and Deposit Requirements Pay your Illinois contributions in full and on time and you receive a credit of up to 5.4% against that federal rate, dropping the effective FUTA rate to 0.6%, or about $42 per employee per year.9Internal Revenue Service. FUTA Credit Reduction Falling behind on state payments puts that credit at risk and raises your federal bill.

If a state borrows from the federal unemployment trust fund and doesn’t repay within two years, the 5.4% credit is reduced by 0.3% per year until the loan is repaid. Illinois has not been a credit reduction state in recent years, but the IRS list is worth checking annually.

FUTA deposits follow their own schedule. If your cumulative FUTA liability crosses $500 in any quarter, deposit it by the end of the following month; if it stays at or below $500, carry it forward until you hit the threshold or reach year-end.8Internal Revenue Service. Topic No. 759, Form 940 – FUTA Tax Return Filing and Deposit Requirements FUTA is reported annually on IRS Form 940, due January 31.10Internal Revenue Service. About Form 940, Employers Annual Federal Unemployment (FUTA) Tax Return

Contractors Are Not in the Calculation

Unemployment tax applies to employees, not independent contractors. Payments to properly classified contractors are excluded from the wages you run through the calculation above. If a worker is treated as a contractor but functions as an employee, IDES or the IRS can reclassify them, and you will owe back taxes plus penalties for the years in question. When status is unclear, the safer choice is to classify the worker as an employee and pay the tax.