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Do You Have to Pay Taxes On Unemployment Income?

The U.S. unemployment rate continues to remain high at 9.1%. This means that many Americans are collecting their unemployment insurance payments, and many are doing so for the first time ever. Now that the tax season is here, some people are left wondering if unemployment payments are taxable or not. I had the same question when I worked on my father’s tax returns last year. The short answer is yes, unemployment income is taxable. Since unemployment income is treated as normal income, the amount is taxable.

Here’s an excerpt form the Internal Revenue Service web site:

Unemployment compensation is includible in gross income. You must report unemployment compensation on line 19 of Form 1040, line 13 of Form 1040A, or line 3 of Form 1040EZ.

Unemployment compensation generally includes any amounts received under the unemployment compensation laws of the United States or of a state. It includes state unemployment insurance benefits and benefits paid to you by a state or the District of Columbia from the Federal Unemployment Trust Fund…

If you received unemployment compensation during the year, you should receive Form 1099-G (PDF) showing the amount you were paid. Any unemployment compensation received during the year must be included in your income, unless you contributed to the fund…

If you are in the process of filing your tax returns and are wondering if you have to pay taxes on unemployment compensation, I hope this clears it up.

What to Do if You Can’t Afford to Pay

If this is the first time you learn about this, it’s likely that you might not be able to pay taxes owe this year. To help you better understand how to deal with this, please read: What to Do if You Can’t Pay Taxes.

Update for 2010-2011: According to the IRS web site (information updated on December 09, 2010), unemployment compensation is includible in gross income — meaning it is taxable.

73 thoughts on “Do You Have to Pay Taxes On Unemployment Income?”

  1. In Michigan they have allowed the suspension of federal and state withholding on unemployment insurance benefit checks to help provide more cash flow to the unemployed.

  2. Pinyo – A further clarification. The spendulus bill of 2009 exempts the first $2400 of 2009 unemployment compensation from federal income tax.

  3. I find it amusing that the government gives you money which you then have to send back to them…

    Mr. GoTo I didn’t know this. Thanks for sharing the info.

  4. @JamesP – You should check with a tax advisor. Based on my research,unemployment benefits are not subject to FICA (i.e., Social Security and Medicare). You only have to pay income tax.

  5. FYI!!!!

    The statement about Michigan suspending federal and state withholding on unemployment is incorrect. The suspension applies on the STATE level only. You will still have to pay taxes on the Federal part.

  6. If I live in South Carolina but collect unemployment from Florida due to prior jobs in 2008 do I pay any Non resident state tax or just Federal and South Carolina State Tax? Any help would be appreciated.

  7. I am listed as an “In trust for” beneficiary on my aunts bank accnt. When I receive this money is it taxed or is it subject to the inheritance laws?

  8. Please help, we received unemployment in 2007 and paid taxes due to the state (NY) that we received the unemployment from. Now, 3 years later, the state which we moved (WV) to in 7 / 07, wants to collect a full year of taxes on that same unemployment, which we already paid. Is this double taxing? Are we required to pay this? How do we know?

    • @Miss Maggie — Get a good tax advisor and he/she should be able to sort this out for you. I had a similar situation where I moved to a different state mid-year. My tax advisor pro-rated my self-employment income between two states. Since VA income tax was cheaper than NY, I actually saved some money.

  9. I found out the hard way after not having them take out taxes on my unemployment check. I went a full year looking for work in my area of training. I later moved to California and got a knock on my door. It was the IRS and yes I had to pay back the $1,700 in taxes all because I didn’t think I had to! I let them take it out of my taxes for that year which left me with nothing. Live and learn!

  10. i found out i have to pay back my unemployment income for 2009 to Indiana. I paid it back but now how do I fix my joint tax return to show I paid the money back to the state of Indiana? Please help? What forms do I need to fill out?

    • @nick – You can search for “indiana amended tax return form” and download the form. Fill out the corrections and send it to the address indicated — if you still owe them money, include a check. The IRS also has an equivalent form for Federal tax.

  11. Years ago I forget what it was , but there was a ruling you can’t tax a tax. wouldn’t it be the same for unemployment?

  12. i get pay from unployment this year.. about 11800 .. so did i have to pay tax also i have to pay child support too

  13. I went 26 years without collecting unemployment. Thousands of dollars taken out of my check for unemployment, which I never collected. Now with the economy so bad, I’m laid off. To me they basically used MY money for 26 years. Now they want to TAX my TAX. It’s not like anyone’s getting rich off of unemployment.

  14. Can I file my tax returns and use my income credits when I drew unemployment 10 months of the previous year? Single father of three doesnt receive support.

  15. Hi, collected SS at age 62, I also collected 24k from unemployment. I know this is over the total amount, but how much will I pay to IRS and will SS lower my monthly benefit thanks so much

  16. Is there a more relaxed Tax table for those of us drawing unemployment benefits? My state only gives me the option to with hold or not with hold, and doesn’t alow us to choose what percentage – it’s a flat 10%. Sure, that might cover the fed’s tax money hunger but where does that leave the state on April 15th? I’ll tell you where, banging on my door @ 8:59:59:59 a.m. on April 16th. Also, what’s the benefit of a stimulus that only bumps you right into the start line of the next tax bracket? I wish republican whiners who fought against extending the benefits would put their time and energy into more productive efforts such as credit score reliefe (as all of ours sink deeper into the toilet) and legislation that will penalize businesses that produced even a penny of profit from the laying off / firing of employees. WOW . . . what a concept!

  17. Does anyone know if Unemployment Insurance is taxable in Wisconsin? I also am working (working 2 days a week ) and have 2 children. Will my Unemployment Insurance affect my tax refund this year?

  18. My question is: I received unemployment for the entire year of 2010 and did not have taxes taken out of my unemployment. Will I still be able to file my taxes this year and receive my EIC and the tax credit for my 2 children?

  19. I moved to NY in Dec. 2009. For most of 2010 I received Florida unemployment. Is that taxable as a NYS resident or is it untaxable because it’s Florida.

  20. @ jackson you have to file in both states go to a pro and ask if they have ever filed in 2 states before, we got screwed big time when we moved and my husband was drawing ui from another state. It was a big mess the lady had to do 3 different ammendments that she wanted us to pay for because she couldn’t READ that one said PA and ONE said MI even tho we told her over and over there are 2 different states first she filed in MI only then PA only then some how she refiled and we ended up having to having to pay the state more $$

  21. I AM SO SCARED! I have been laid off since 05/2010. I received unemployment bi-33kly checks $900…. Just recently I received a 1099 showing $0.00 withheld for both state & federal. OMG! My mouth hit the floor…. I did not know about this.. I am a single Mother living check by check and still not able to land a job. I fear I will have no returns or I may not have enough to break even…. If this is the case will the IRS garnish my unemployment check? HELP! 🙁

  22. I worked for 45 years.. paid taxes, voted, contributed to society.. I lost my income when the nonprofit I worked for went under.. I also lost HMO coverage and have enormous hospital bills related to cancer and heart problems.. I took early (63) S/S and get a small disability also.. I was not aware unemployment was taxable.. Does anyone know if I have to pay tax on $10,935 in unemployment? FYI: the combined total income is just under $25k and I am a window with no dependents.. I am so, so stressed and afraid.. I have no other money.. Will I have to pay tax on the combined “income” or just the $10,935, which I can’t afford.

  23. I am on uemployment and my husband is on social security disability. I am a full time student and want to know if I qualify for the student-loan credit when I didn’t have taxes taken out on my unemployment.

  24. I collected unemployment from Feb 2010 until Nov 2010. When I did my taxes my return was crap… I even claimed my three kids and was looking at receiving $600 and owing the state of NY $50… When I didnt put the Unemployment Comp in I got a whole lot more back… I didn’t have taxes taken out of my unemplyment because honestly i couldnt afford it… and I was not getting any other help- welfare would not help not even with foodstamps and I have three children. Whats the point in having taxes taken out of unemployment if there gonna “supposedly” return them when you claim your taxes?? So now I will get penalized for $$ I would have gotten back anyway- but I guess now they will have a better excuse to screw me with interest and so on and so forth? Can any one tell me what exactly will happen since I didnt claim my unemployment on my taxes for this year so now what? How much trouble am i In?

  25. I collected unemployment from VA all of last year but lived in New York. Upon getting my taxes done, I was told I owed the state of New York over 500 dollars in state taxes. This doesn’t seem possible because I have earned no money from New York. If anything I have helped there economy by spending my VA unemployment in NY. Please help!

  26. I only made $6500 unemplyment income last year and no other income. Do i still have to file tax return and pay tax? Does anyone know the answer.

  27. Joe- if you get audited you will end having to pay all the money you owe plus interest and penalties, and you could face jail time…

    Greta- If you maintained living quarters in NY for at least part of the year you owe NY State taxes…

    Y- If you make more than $450 from any source of income you must file taxes

    Kate- Try H&R blocks online tax prep system, its free and pretty easy to use, if you can’t figure it out expect to shell out around $30-$100 for a tax preparer…

  28. I lost my job and when I started receiving unemployment compensation from the state of NJ, they asked if I wanted 10% of the payment taken out for taxes. I said yes and that amount has been taken out for the 7 months I have received checks. I have no idea where that money ended up! Where on my tax return do I put this amount which has already been withheld?
    Thanks for any information…

  29. Do You Have To Social Security Tax On Unemployment Income?

    If so, does this mean you continue to earn your four social credits as with normal employment?

    Thanks,

    Pragito

  30. makes sense to have them take Taxes out Of your Check…That way you won’t have to Pay At Tax-Filing Time.

  31. I lived and worked in KS until June when I moved to VA and began collecting unemployment from KS. Where do I account for that unemployment income. Assume it’s my KS state return since I have had no income from VA since I moved here.

  32. @davidh – I haven’t encounter the situation personally. It would make sense to file KS state tax and not VA. However, the best bet is to call KS or VA state tax agency — these guys are very helpful and should be able to answer your questions.

  33. hi, i hope you can help me on this question. can i file for or get a refund if i did not work at all this year, but i received unemployment for 8 months. and still have not worked. or made any other income.i have 3 dependents , my wife and 2 children. or will i have to pay taxes for the unemployment i received?

  34. @Kendra – You will have to file your tax returns. Depending on your situation, you may or may not owe taxes. However, it’s probably more likely that you will have to pay some taxes on the unemployment income you received for the 8 months period.

  35. Will I be able to recieve any tax credits for my 2 children as a single mother even though I recieved unemployment benefits for almost the entire year of 2011? I did not work and received food stamps the entire year.

  36. @Mariana – I think the credit you are eligible for is The Child Tax Credit. If you went back to school, you might be eligible for The American Opportunity Tax Credit also. I don’t think you’re eligible for The Earned Income Tax Credit because you didn’t work. See: http://www.irs.gov/Individuals.....y-for-EITC

    @Erin – If you didn’t receive unemployment benefits in 2011, then there is nothing to report for this year.

  37. Is it possible to print out Form 1099G showing what was paid to my husband in unemployment income, online? Is there a website I can print out that information instead of waiting for unemployment office to send it to me throught the mail? I’d like to start filing taxes for 2011.
    please advise as soon as you can.
    thanks
    Rosa T Key

  38. @Terri – It’s always considered a taxable income; however, if you are in the lowest tax bracket, you won’t owe any income tax to the IRS.

    @Rosa – You could also just add up all the unemployment inocme you received and use that number for tax calculation. I don’t know if there’s a way to access the 1099G online or not.

  39. i got layoff from July 2011 to December 2011, i got my 1099G from the unemployment they pay me $5,592 but i didn’t make them take out any of the state and federal taxes, i wonder how much i have to pay. i did work from January to July. thanks for any help

  40. Where i worked we got flooded this past summer so i collected $2223.00 in unemployment . are you able to tell me how much i will have to pay in fed taxes on this?
    also is that 2400$ limit no longer on the table??

    Thanks ken…..

  41. @Javier – When you do your taxes, the unemployment income will be treated just like a regular income and you’ll have to pay taxes at your marginal tax bracket.

    @Kenneth – I think the $2,400 exemption has expired. Your situation is the same as Javier above, the $2,223 will be added to your total income and taxes will be calculated on that amount.

    @Javier & Kenneth – Since I don’t know what you guys make, your filing status, and how much deductions/credits you have, I can’t tell you how much you owe on your unemployment income.

  42. I neglected to have taxes taken out my unemployment checks. I’m sure I have to pay them back, it would just be nice to know how much? This is my 2nd yr collecting…I didn’t think I needed to bring in my 1099 last yr because there werent any taxes taken out. I’m going to have to pay for both years….aren’t I?

  43. Hi, I started unemployment in January of 2011 and i collected a total of $10,980, if i haven’t work or earn any money in 2011 do i have to file my tax return?? if i do have to file my taxes do i have to return 10% of the total or i have to pay everything? thanks.

  44. I lived in Indiana all of 2011 and collected unemployment from Kentucky , that is the only income I had. I received my 1099 today and where it says state name and state identification number are blank. How do I know which state I paid the taxes to?

  45. @Nai – Your tax preparer should be able to help you file an amended tax return. You might have to pay penalty on top of the taxes owe, but it’s better to correct this now.

    @Rosa – It’s best to check with your state unemployment office.

    @Miguel – Yes, you have to file your tax return and pay taxes if they were not withheld.

    @Brenda – It’s best to ask a tax preparer that’s familiar with the local tax law. In general, you have to pay both state and federal income taxes. Since Kentucky and Indiana are reciprocal states — http://www.payroll-taxes.com/s.....ndiana.htm — you might ended up paying only Indiana state tax (but don’t quote me on this).

    @Lu P. – It’s the same as your regular income tax rates.

  46. I received unemployment for a short period last year but after an appeals trial, my ex-employer denied it and now i am having to pay back the full amount. Do i still have to pay taxes on it since i am repaying the unemployment?

  47. For the past yr Ive collected untaxed unemployment benefits, I have 2 children, 1 goes to college as well as myself. I’m really concerned that at tax time i wont receive a refund. i received $17,000 from EDD, no other income. should I be worried?
    Please Help
    Thank You

  48. i was wondering i owe 2000 in taxes for unemployment but i claim my son..i usually get 4400 back after i claim him and do my taxes..does that mean when i file that unemployment would take 2000 from my 4400 that i would get back?..

  49. Hi. During 2011 ( July) the company that i worked layoff half of the employees. Since then I been collecting Unemployment. i live in Illinois and I have a (5 Year Old son). During 2011 i have over $20,000 dlls of invoices that i paid from my surgery and son surgery. How can i deduct this amount from my income tax, also i receive over 560.00 weekly since Middle of July – December 2011. How can i reduce expenses from my (6 months of work income- unemployment- surgeries)…

  50. I filed for unemployment in California. Then a few months later, I moved to Hawaii with my husband when he got a job there. So I have been collecting CA unemployment in HI. I know I have to pay Federal income tax on it. But CA doesn’t tax unemployment. I can’t figure out whether I should file state taxes in HI or CA. Maybe both? File nonresident taxes in CA for the unemployment, and file in HI for my husband’s income?

  51. Hi, I received Unemployment during all year 2011 about $11,000 in Florida( according to my 1099G no tax was withheld), I made some extra cash selling used stuff on Ebay ($9,000) I have one dependent my son and I am divorced not receiving child support or any help from his father. Will I still qualify to get The Child Tax Credit ???

  52. @Sam – Assuming you would normally get $4,400 back and you now owe $2,000 in taxes due to unemployment, then yes, your refund would be reduced to about $2,400.

    @OV – According to the IRS, you can deduct medical expenses exceeding 7.5% of your adjusted gross income. See: http://www.irs.gov/taxtopics/tc502.html

    @Dena – You will have to ask a local tax advisor. I checked their FAQ — http://hawaii.gov/labor/ui/pdf.....-14-09.pdf — and it doesn’t say anything about out-of-state unemployment income.

    @Isaca – You may have received $9,000 from selling used stuff on eBay, but you have to deduct the cost basis for these items (so your profit is likely much lower than $9,000). You can use this tool to determine if you are eligible for the Child Tax Credit: http://www.irs.gov/Individuals/Child-Tax-Credit

  53. Leaving this info here for anyone in my specific situation:

    I am single and have no dependents. I moved from California (where I was a resident for 30 years) to Montana in April of 2011. I received California Unemployment the rest of 2011 and did not earn any income from or in the State of Montana.

    I just called the Montana Department of Revenue and was informed that, as a single person, if my Federal taxable income was $4500 or less, not including unemployment income, that I do not have to file a Montana tax return.

    If you are in a similar situation (different states, though) it helps to call one or both state’s Revenue Departments to get info. Good luck.

  54. I collected unemployment last year. Was laid off in Florida then moved to Georgia. They are taking taxes out, so why do i have to have taxes out of the same money from the State of Georgia? That is being taxes twice?

  55. Ok, I have read many of the post on here but I am still a little confused… So here is my question. According to my 1099-G my unemployment compensation was 6105.00 and fed tax withheld was 594.00 Since I also worked part time during some of there year I also make 3949.00 from employer with only 18.00 fed taxes taken out. I was a full time student and have 3 dependents.. So my question how is it if last year from my employer I made 11,249.00 and got a refund of 6916.00 and this year including the unemployment I made 10054.00 and I am only getting back 3500.00.. That is a huge difference from last year.. Am I doing something worn here?

  56. MA is paying me unemployment income while I’m now residing in SC while getting paid by MA. Do I just report the income on my state tax return to MA or is it split up by the time I resided in each state?

  57. Moved from CA to TX and received unemployment wages from CA in 2011. I know TX has no state tax. Does CA take tax on unemployment income and do I have to pay CA tax on my unemployment wages? Help???

  58. I had unemployment for a week or two in 2011 before my claim was denied. I owe unemployment about 400 dollar. Do I still need to claim it if I owe it back

  59. According to IRS Pub. 17, “If you contribute to a governmental unemployment compensation program and your contributions are not deductible, amounts you receive under the program are not included as unemployment compensation until you recover your contributions. If you deducted all of your contributions to the program, the entire amount you receive under the program is included in your income.” Before I lost my job, I contributed $200 from my paychecks to the mandatory NJ state unemployment fund. After losing my job, I received $1000 in unemployment benefits, and received a 1099-G showing $1000 in Box 1. I am NOT itemizing, so none of my contributions to the NJ unemployment compensation program are deductible. Therefore, can I enter only $800 on line 19 of Federal Form 1040 (since $1000-$200 = $800)?

  60. I collected unemployment since April of 2011 totaling 11800 dollars, I did have a part time job also and claimed that when doing my unemployment biweekly. I also had 10% taken out of my unemployment for taxes could someone please tell me if I will owe any money this tax season? Thank you.

  61. Hi, my husband has 2 jobs, and on one he only made $6000.00 and just took out $4.40 out of federal, does he still have to do his taxes for this job? and another question can i do my taxes seperate with my daughter as a dependent?

  62. @Cat – is it possible that Florida withheld Federal income tax only and Georgia is imposing its state tax on your unemployment benefit?

    @Krystyna – There’s not enough information there because you didn’t say how much your employer withheld last year. In any case, it’s a big enough difference that I would get a tax pro to go over your numbers (if you did hire someone, then get a second opinion). If you want to save money, you can try free online software.

    @John – I think it’s best to consult a local tax preparer. That’s what I did when I moved from NY to VA. My preparer prorated my tax payment according to how long I lived in each state and filed a return for each state.

    @Bo – CA doesn’t tax unemployment income, see: http://www.taxes.ca.gov/Income.....employment

    @Brittany – I’ve read somewhere that you can adjust the amount reported to the IRS if you paid back the benefit. If you haven’t, then you have to report it as an income.

    @Randy – It sounds like you’re correct, but I don’t know the answer.

    @Ashley – It depends on your filing status, # of dependents, what other credits and deductions you’re eligible for, and whether or not you will owe state tax on the $11,800.

    @Dina – Yes, he still has to file his tax returns. In general, it’s better to file jointly unless you have a really good reason not to.

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