Unemployment benefits are taxable income at the federal level, and in most states

The federal government treats unemployment as ordinary income. You owe federal income tax on the full amount you receive, whether you collected it from your state program, the federal Pandemic Unemployment information program, or any other source. This applies to all unemployment payments—regular benefits, extended benefits, and emergency programs.

Most states also tax unemployment as income. A handful do not: Alaska, Florida, Illinois, Louisiana, Mississippi, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming have no state income tax on unemployment. If you live in any other state, you owe state income tax on your benefits as well.

The tax obligation exists whether or not your employer withheld taxes from your paychecks. Unemployment is separate income, and you are responsible for paying tax on it even if you were not working when you received it.

Key Takeaways

  • Federal income tax applies to all unemployment benefits, and you must report the full amount on your federal tax return.
  • Most states also tax unemployment income, with twelve states having no state income tax on benefits.
  • You can request tax withholding when you file your claim or at any time while receiving benefits, which reduces what you owe at tax time.
  • If you did not withhold taxes, you may owe a lump sum when you file your return, or you can make quarterly estimated tax payments to avoid a large bill.
  • The IRS will send you a Form 1099-G in January showing the total unemployment you received in the previous year.

How much tax you will owe depends on your total income

The tax you owe on unemployment is not a flat percentage. It depends on your total income for the year—unemployment plus any wages, self-employment income, investment income, or other sources. The more income you have, the higher your tax rate.

If unemployment was your only income and it was below the standard deduction for your filing status, you may not owe federal tax at all. The standard deduction for 2024 is $14,600 for a single filer and $29,200 for married filing jointly. If your unemployment plus other income falls below that threshold, you have no federal tax liability.

If your total income exceeds the standard deduction, you will owe tax on the amount above it. Your tax rate depends on your tax bracket, which is determined by your total income and filing status. A tax professional or the IRS Free File program can help you calculate what you owe.

Requesting withholding when you claim benefits

Most state unemployment offices allow you to request that taxes be withheld from your benefits when you file your initial claim. The amount withheld is usually 10 percent of your weekly benefit amount, though some states offer other percentages. Withholding does not change how much you receive—it straightforward sets aside money for taxes.

If you did not request withholding when you filed, you can usually add it later by contacting your state unemployment office or logging into your online account. The process varies by state, but most allow you to change your withholding preference at any time during your claim.

Withholding is voluntary. You are not required to have taxes withheld, but doing so can prevent a large tax bill when you file your return. If you expect to owe taxes and cannot pay them in one lump sum, withholding spreads the cost across your benefit payments.

What happens if you do not withhold taxes

If you received unemployment without requesting withholding, you will owe the full tax amount when you file your return. Depending on how much you received and your other income, this could be several hundred or several thousand dollars.

You have two options: pay the full amount when you file, or make quarterly estimated tax payments to the IRS throughout the year. Estimated payments are due on April 15, June 15, September 15, and January 15 of the following year. Making these payments can help you avoid a large bill and may reduce penalties if you would otherwise owe a substantial amount.

If you cannot pay what you owe, the IRS offers payment plans. You can request an installment agreement through the IRS website or by phone, which allows you to pay your tax debt over time with interest and a setup fee.

Reporting unemployment on your tax return

In January, your state unemployment office will send you a Form 1099-G, which shows the total unemployment benefits you received in the previous calendar year. This form goes to both you and the IRS. You must report the amount from Box 1 of the 1099-G on your federal tax return, on the line for unemployment compensation.

If you received benefits from multiple states, you will receive a separate 1099-G from each state. Add all the amounts together and report the total on your return.

Some states also require you to report unemployment on your state tax return. Check your state's tax instructions or contact your state tax agency to confirm. If your state taxes unemployment, you will report the same amount from your 1099-G on your state return as well.

Special rules for pandemic-era unemployment programs

The federal Pandemic Unemployment information (PUA) program, which ran from 2020 through 2021, was also taxable income. If you received PUA, you should have received a 1099-G showing that amount. Report it the same way you would report regular state unemployment.

In 2021, Congress allowed taxpayers to exclude up to $10,200 of unemployment received in 2020 from their federal taxable income if their modified adjusted gross income was under $150,000. This was a one-time provision that applied only to 2020 unemployment and only on your 2020 tax return. It does not explore to unemployment received in 2021 or later years.

If you filed your 2020 return before this rule was enacted and did not claim the exclusion, you could file an amended return to claim it. The important date to amend a 2020 return was generally three years from the original filing date.

State-specific tax treatment

Twelve states do not tax unemployment benefits: Alaska, Florida, Illinois, Louisiana, Mississippi, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. If you live in one of these states, you owe no state income tax on your unemployment, though you still owe federal tax.

All other states tax unemployment as ordinary income. Some states allow withholding similar to the federal system, while others do not. Check your state's unemployment office website or contact them directly to learn whether you can request state tax withholding and how to do it.

If you moved to a different state during the year you received unemployment, you may owe tax to both states. The rules for this vary by state. A tax professional familiar with your situation can advise you on your obligations.

Frequently Asked Questions

Do I have to pay taxes on unemployment if I did not work?

Yes. Unemployment is taxable income regardless of whether you were employed when you received it. The IRS treats it as ordinary income for tax purposes. You owe federal tax on the full amount, and state tax in most states, even if you had no other income during the year.

What if I owe more in taxes than I can pay right now?

The IRS offers payment plans that let you pay your tax debt over time. You can request an installment agreement through IRS.gov or by calling the IRS. You will pay interest and a setup fee, but this prevents penalties for non-payment and gives you time to pay.

Can I get a refund if too much tax was withheld from my unemployment?

Yes. If you requested withholding and more tax was taken out than you actually owe, you will receive a refund when you file your return. The refund is calculated based on your total income and tax liability for the year.

Do I report unemployment on my state return if my state does not tax it?

No. If you live in one of the twelve states that do not tax unemployment, you do not report it on your state return. You still report it on your federal return. Check your state's tax instructions to confirm your state's rules.

What if I lost my 1099-G form?

Contact your state unemployment office and request a duplicate. You can usually do this online through your account or by calling their customer service line. The IRS also has a copy, so if you cannot get a duplicate quickly, you can report the amount you remember receiving and correct it later if needed.