Unemployment benefits are taxable income
Yes, you owe federal income tax on unemployment benefits. The IRS treats them as taxable income, the same way it treats wages from a job. You do not have to pay Social Security or Medicare taxes (FICA) on unemployment, but you do owe federal income tax, and in most states, state income tax as well.
The amount you owe depends on how much unemployment you received during the year and your other income. If unemployment was your only income and the total was below the standard deduction for your filing status, you may owe nothing. If you had other income or received a large unemployment payment, you will likely owe tax.
The state that paid your unemployment benefits will send you a Form 1099-G in January or February showing the total amount you received. You report this on your federal tax return, and your state tax return if your state has income tax.
Key Takeaways
- Unemployment benefits count as taxable income for federal tax purposes and for state income tax in most states.
- You will receive a Form 1099-G from the state that paid your benefits, showing the total amount received during the year.
- You can request that taxes be withheld from your unemployment payments when you file your claim, which reduces what you owe at tax time.
- If you did not have taxes withheld and expect to owe more than $1,000, you may need to make quarterly estimated tax payments to avoid penalties.
- The standard deduction for 2024 is $14,600 for single filers and $29,200 for married filing jointly; if your only income is unemployment below these amounts, you may owe no tax.
How to report unemployment on your tax return
When you file your federal return, you report the total from your Form 1099-G on line 19b of Form 1040 (the main federal income tax form). This amount goes into your total income, which determines whether you owe tax and how much.
If you received unemployment in 2024, you will get Form 1099-G by January 31, 2025. Check the amount carefully—if it is wrong, contact the state unemployment office that issued it and ask for a corrected form. Do not file your return until you have the correct 1099-G.
For state taxes, the process varies. Some states tax unemployment the same way the federal government does. Others do not tax unemployment at all. A few states tax it only in certain situations. Check your state's tax agency website or call them to find out whether your state taxes unemployment and how to report it.
Withholding taxes from unemployment payments
When you file for unemployment, you have the option to request that federal income tax be withheld from your payments. This works the same way withholding works from a paycheck—the state takes a percentage of each payment and sends it to the IRS on your behalf.
If you choose withholding, you fill out a Form W-4V (Voluntary Withholding Request) when you explore for benefits. You can request 10%, 12%, 22%, or a flat dollar amount. Most people choose 10% because it is straightforward and covers a portion of what they will owe.
Withholding does not eliminate your tax bill, but it spreads the cost across the months you receive benefits instead of hitting you with a large bill in April. If you did not request withholding when you filed your claim, you can usually request it later by contacting your state unemployment office.
What happens if you do not withhold taxes
If you receive unemployment without having taxes withheld, you may owe a large amount when you file your return. The IRS does not charge interest or penalties if you owe less than $1,000, but if you owe more than that, you can face penalties for underpayment.
To avoid this, you have two options. First, you can request withholding from your remaining unemployment payments (if you are still receiving them). Second, you can make quarterly estimated tax payments to the IRS using Form 1040-ES. These are due April 15, June 15, September 15, and January 15 of the following year.
If you are unsure whether you will owe more than $1,000, use the IRS tax withholding estimator on irs.gov. It walks you through your income and tells you roughly what you will owe. This helps you decide whether to request withholding or make estimated payments.
State-by-state differences in unemployment taxation
Most states tax unemployment benefits the same way the federal government does. However, a handful do not tax unemployment at all. These include Alaska, Florida, Illinois, Mississippi, Nevada, New Hampshire, Pennsylvania, South Dakota, Tennessee, Texas, Washington, and Wyoming.
A few other states have special rules. For example, some states do not tax unemployment if your income falls below a certain threshold. Others tax it only if you are not a resident of the state that paid the benefits. Check your state's tax agency website to find the exact rule for your situation.
If you moved during the year or received unemployment from a state where you do not live, the rules become more complex. You may owe tax to both your home state and the state that paid benefits. Contact both state tax agencies or a tax professional for guidance on your specific situation.
Using the standard deduction to reduce your tax bill
The standard deduction is an amount you can subtract from your total income before calculating the tax you owe. For 2024, the standard deduction is $14,600 for single filers, $29,200 for married couples filing jointly, and $21,900 for heads of household.
If your only income during the year was unemployment and the total was less than the standard deduction for your filing status, you owe no federal income tax. For example, if you are single and received $12,000 in unemployment, you subtract the standard deduction of $14,600, leaving zero taxable income.
However, you still need to file a return if you had taxes withheld from your unemployment payments. Filing allows you to claim a refund of the taxes that were taken out. Even if you do not owe tax, filing gets you money back.
When to file your return and where to send it
You must file your federal return by April 15 of the year following the year you received unemployment. If you cannot file by then, you can request an extension, but the extension only delays filing—it does not delay when taxes are due. Any tax you owe is still due on April 15.
You can file online using free software from the IRS Free File program (available at irs.gov if your income is below a certain threshold), by mail, or through a tax professional. If you file by mail, send your return to the IRS address for your state, which is listed in the Form 1040 instructions.
State returns are usually due on the same day as your federal return. Some states allow extensions if you request them before the important date. Check your state tax agency website for the exact important date and where to send your return.
Frequently Asked Questions
Do I have to file a tax return if I only received unemployment?
You must file if you had taxes withheld from your unemployment payments, because you may be due a refund. If you did not have taxes withheld and your total income was below the standard deduction for your filing status, you do not have to file—but you may want to if you are due a refund or a tax credit.
What if I received unemployment in one state but live in another?
You may owe tax to both states. The state that paid the benefits will send you a Form 1099-G. You report this to both your home state and the state that paid benefits. Some states offer a credit to avoid double taxation, but you have to claim it on your return. Contact both state tax agencies for guidance.
Can I deduct unemployment benefits or claim a credit for them?
No, you cannot deduct unemployment benefits. However, you may be able to claim the Earned Income Tax Credit (EITC) if your total income is low enough, even if part of it came from unemployment. Check the IRS website or use the EITC assistant tool to see if you may have access to.
What if the Form 1099-G I received is wrong?
Contact the state unemployment office that issued it and report the error. Ask them to send you a corrected Form 1099-G. Do not file your tax return until you have the correct form. If you already filed with the wrong amount, you can file an amended return once you receive the corrected 1099-G.
Will I get a refund if I had too much tax withheld?
Yes. If more tax was withheld from your unemployment payments than you actually owe, you will receive a refund when you file your return. The refund is usually issued within a few weeks of filing, either by direct deposit or check, depending on how you filed.