Self-Employed Workers and Unemployment: What You Need to Know

Self-employed people cannot claim traditional unemployment insurance in most states. Unemployment benefits are designed for workers who lose a job through no fault of their own — a category that does not include self-employed individuals, who are their own employer. However, self-employed workers do have other routes to income support during hardship, and the rules changed significantly during the pandemic.

The key distinction is this: standard unemployment insurance comes from a fund built by employer payroll taxes. Self-employed workers do not pay into that fund because they have no employer. Instead, they pay self-employment tax, which funds Social Security and Medicare. That difference in funding structure is why the traditional program does not cover them.

Key Takeaways

  • Self-employed workers cannot claim regular unemployment insurance because they do not pay into the unemployment insurance fund.
  • The Pandemic Unemployment information (PUA) program, which ran from 2020 to 2021, covered self-employed workers but is no longer active in any state.
  • Self-employed workers facing income loss can explore disaster unemployment information, which becomes available after declared disasters in specific counties.
  • Some states offer short-term disability or family leave programs that may cover self-employed workers, though rules vary widely by state.
  • Self-employed workers can deduct business losses on their tax return and may be able to access other information programs like food support or utility help.

Why Self-Employed Workers Are Excluded from Standard Unemployment

Unemployment insurance is funded by a payroll tax that employers pay on behalf of their employees. In most states, employers contribute between 0.6% and 6% of wages to the state unemployment insurance fund, depending on their industry and claims history. Self-employed workers do not have an employer making these contributions on their behalf.

Self-employed workers do pay self-employment tax — 15.3% of net income — but that money goes to Social Security and Medicare, not to the unemployment insurance fund. Because self-employed workers have not contributed to the unemployment insurance system, they are not covered by it. This is true whether you are a freelancer, contractor, consultant, small business owner, or gig worker.

The structure is the same across all 50 states. No state unemployment insurance program covers self-employed workers under normal circumstances.

Pandemic Unemployment information: A Temporary Program That Has Ended

During the COVID-19 pandemic, the federal government created the Pandemic Unemployment information (PUA) program specifically to cover self-employed workers, gig workers, and others not may be able to access for regular unemployment. PUA was active from March 2020 through September 2021 in most states, though some states ended it earlier.

PUA is no longer available in any state. The program expired in September 2021 and has not been renewed. If you are self-employed and lost income after that date, PUA cannot help you. However, understanding that this program existed is useful context for why self-employed workers sometimes believe they should have access to unemployment — because for a brief period, they did.

Disaster Unemployment information for Self-Employed Workers

Self-employed workers may be able to claim Disaster Unemployment information (DUA) if they live in a county where the federal government has declared a disaster. DUA is administered by the Federal Emergency Management Agency (FEMA) and becomes available after hurricanes, floods, wildfires, severe storms, and other events that meet the federal threshold.

To claim DUA, you must live in a county included in the disaster declaration, and you must show that the disaster directly caused you to lose income or be unable to work. You cannot claim DUA for general economic hardship — only for income loss tied to a specific declared disaster. The process process and benefit amount vary by state, and you typically explore through your state's unemployment office.

You can check whether your county is under a disaster declaration by visiting the FEMA website or calling your state unemployment office. If a declaration is active, they can tell you whether DUA is currently open and what documents you need to explore.

State Disability and Family Leave Programs That May Cover Self-Employed Workers

A small number of states offer short-term disability or family leave programs that cover self-employed workers. These programs are separate from unemployment insurance and are designed to replace income when you cannot work due to illness, injury, or to care for a family member.

California, New Jersey, New York, and Rhode Island all have state disability insurance programs that cover self-employed workers who have paid into the system. Washington State has a paid family leave program that covers self-employed workers. However, the rules about who qualifies, how much you receive, and how long you can claim vary significantly by state. Some require you to have been self-employed for a minimum period before you can claim; others require you to have earned a minimum income in the prior year.

If you are self-employed and live in one of these states, contact your state labor department to learn whether you are covered and what the current rules are. The requirements change periodically, and your specific situation — whether you are incorporated, whether you have employees, how long you have been in business — can affect your coverage.

Other information Programs for Self-Employed Workers Facing Income Loss

When unemployment insurance is not available, self-employed workers can explore other programs that do not require employment status. These include food information (SNAP), utility information, housing information, and childcare support. Many of these programs are based on household income rather than employment type, so self-employed workers with reduced income may be able to access them.

You can also deduct business losses on your tax return, which may lower your taxable income and affect your may be able to access for tax credits like the Earned Income Tax Credit (EITC). If you are self-employed and your business income dropped significantly, speaking with a tax professional about how to report the loss can help you recover some money through your tax return.

The 211 service (dial 211 or visit 211.org) can connect you with local information programs in your area, including emergency financial help, food banks, and utility information. These programs do not ask about employment status and may be available to you based on income alone.

What to Do If You Are Self-Employed and Have Lost Income

Start by determining whether you live in a county under a disaster declaration. If you do, contact your state unemployment office to ask about Disaster Unemployment information. If you do not, or if DUA is not available, ask whether your state has a disability or family leave program that covers self-employed workers.

Next, explore general information programs. Call 211 or visit your county's social services office to learn what programs you may be able to access based on your current household income. These might include food information, utility help, or emergency financial information.

Finally, speak with a tax professional or accountant about how to report your business loss on your tax return. If your income dropped significantly, you may be able to claim a larger Earned Income Tax Credit or other tax benefits when you file.

Frequently Asked Questions

Can I get unemployment if I am a contractor or freelancer?

No. Contractors and freelancers are self-employed and do not pay into the unemployment insurance fund, so they are not covered by standard unemployment insurance. The only exception is if you live in a county under a federal disaster declaration and can show the disaster caused your income loss.

What if I incorporated my business — can I get unemployment then?

If you are incorporated and pay yourself a salary as an employee of your own corporation, you may be covered by unemployment insurance. However, if you are a sole proprietor or operate as an S-corporation where you take distributions rather than a salary, you are still considered self-employed and are not covered. Speak with a tax professional or your state unemployment office about your specific situation.

Can I get unemployment if my business closed?

No. Unemployment insurance covers workers who lose a job, not business owners whose business closes. If your business closed due to a declared disaster, you may be able to claim Disaster Unemployment information. Otherwise, you would need to explore other information programs based on your current income.

Will the Pandemic Unemployment information program come back?

PUA was a temporary pandemic-specific program and is not currently active. Congress would need to pass new legislation to create a similar program. There is no indication that PUA will return, though disaster-related unemployment information remains available in counties under federal disaster declarations.

What can I do right now if I have lost self-employment income?

Call 211 to find local information programs, check whether your county is under a disaster declaration by visiting FEMA's website, and contact your state labor department to ask about state disability or family leave programs. You can also speak with a tax professional about reporting your business loss on your tax return.