SUI on a W-2 stands for State Unemployment Insurance, a payroll tax that funds benefits for workers who lose their jobs through no fault of their own. In most states only the employer pays it, so nothing shows up on your W-2 at all. If you do see an SUI amount, you almost certainly work in Alaska, New Jersey, or Pennsylvania — the three states that require employees to contribute. That contribution may be deductible on your federal return if you itemize.
What SUI Funds and Who Pays It
State Unemployment Insurance is part of a joint federal-state program. The federal side, governed by the Federal Unemployment Tax Act, sets minimum standards and collects a separate employer tax that funds the system’s administrative costs and extended benefits during high-unemployment periods.1U.S. Department of Labor, Employment & Training Administration. Unemployment Insurance Tax Topic Each state runs its own program on top of that, setting its own rates, wage bases, and benefit amounts.
In the vast majority of states, the employer covers the entire SUI cost. Businesses pay into their state’s unemployment fund based on payroll, and workers never see a deduction. Federal law triggers this employer obligation once a business pays at least $1,500 in wages during any calendar quarter or employs at least one person for part of a day in 20 or more different weeks during the year.2Internal Revenue Service. Topic No. 759, Form 940 – Employers Annual Federal Unemployment (FUTA) Tax Return
Alaska, New Jersey, and Pennsylvania are the exceptions. In these three states, employers withhold a small percentage from each paycheck and remit it to the state unemployment fund. For 2026:
- Alaska: 0.50% on wages up to $54,200
- New Jersey: 0.3825% on wages up to $44,800
- Pennsylvania: 0.07% with no wage cap
Independent contractors do not pay SUI. It applies only to employees. If you received a 1099-NEC rather than a W-2, no SUI has been withheld or paid on your behalf.
Where SUI Appears on the 2026 W-2
For the 2026 tax year, the IRS split the old Box 14 into two parts. What was formerly “Box 14—Other” is now “Box 14a—Other,” and a new Box 14b was created specifically for Treasury Tipped Occupation Codes.3Internal Revenue Service. 2026 General Instructions for Forms W-2 and W-3 Your SUI withholding shows up in Box 14a, along with items like state disability insurance, union dues, and other miscellaneous entries. The IRS requires employers to label each item, so a description sits next to the dollar figure.
The exact label varies. Common versions include “SUI,” “PA SUI,” “NJ SUI,” and “AK SUI.” The IRS does not standardize Box 14a labels, so payroll software from different providers may word the entry differently. If the code is unfamiliar, ask your payroll department what it represents.
How SUI Differs From SDI and FLI
Box 14a can hold more than one state payroll deduction, and SUI is easy to confuse with two others that appear alongside it. Each funds a different program:
- SUI (State Unemployment Insurance) pays benefits to workers who lose their jobs involuntarily. Employee withholding applies only in Alaska, New Jersey, and Pennsylvania.
- SDI (State Disability Insurance) pays temporary benefits to workers who cannot work because of a non-work-related illness, injury, or pregnancy. Several states withhold SDI from employee wages as a separate line item.
- FLI (Family Leave Insurance) pays benefits when you need time off to care for a seriously ill family member or bond with a new child. In some states FLI is folded into the SDI tax rather than shown separately.
Each abbreviation may carry a state prefix, such as “NY SDI” or “NY FLI.” All three are employee-paid state payroll taxes that may be deductible on Schedule A, but they fund different benefits. Check the label on each Box 14a entry before assuming what it is.
Can You Deduct SUI on Your Federal Return
Employee SUI contributions count as state taxes paid. You can deduct them on your federal return if you itemize on Schedule A of Form 1040 instead of taking the standard deduction.4Internal Revenue Service. Instructions for Schedule A (Form 1040) (2025) SUI goes on Schedule A, line 5, alongside state income tax, property tax, and sales tax.
Itemizing pays off only when your total itemized deductions exceed the standard deduction. For 2026, the standard deduction is $16,100 for single filers, $32,200 for married couples filing jointly, and $24,150 for heads of household.5Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 Most employees in Alaska, New Jersey, and Pennsylvania contribute a few hundred dollars or less in SUI per year, so SUI alone will not push you over the standard deduction. If you already itemize for other reasons, adding SUI to your state and local tax total lowers your federal bill.
The SALT Deduction Cap
The total deduction for state and local taxes is capped. The One Big Beautiful Bill Act raised the limit from $10,000 to $40,000 for 2025, with annual increases through 2029. For 2026 the cap is $40,400 ($20,200 if married filing separately). Taxpayers with adjusted gross income above $500,000 ($250,000 if married filing separately) face a lower limit.4Internal Revenue Service. Instructions for Schedule A (Form 1040) (2025) Because employee SUI contributions are small, they rarely push a filer near the cap on their own, but they add to the deductible total.
Fixing SUI Errors on Your W-2
If the SUI figure does not match your pay stubs, or SUI appears when you do not work in Alaska, New Jersey, or Pennsylvania, contact your payroll department. Employers are required to issue a corrected Form W-2c once an error is identified. Make the request in writing, by phone, or through whatever process your employer uses, and keep the pay stubs that document the discrepancy. Filing a return with an incorrect W-2 can lead to overpayment or underpayment, so resolve the issue before the filing deadline.