Unemployment checks are taxable income, and you may owe federal income tax on them

Yes, unemployment benefits are taxable at the federal level. The IRS treats them as ordinary income. You report the full amount you received on your tax return, whether or not your state withheld taxes from your checks.

Most states do not withhold federal income tax automatically from unemployment payments. This means you may receive a check for the full amount, but still owe taxes on it when you file. Some states offer the option to have taxes withheld, but you have to request it — it does not happen by default.

The amount you owe depends on your total income for the year, your filing status, and whether you have other income sources. A person who received only unemployment benefits and no other income may owe nothing. A person who worked part of the year and also collected unemployment will owe taxes based on their combined earnings.

Key Takeaways

  • The IRS counts all unemployment benefits as taxable income on your federal return, regardless of whether your state withheld taxes.
  • Most states do not automatically withhold federal income tax from unemployment checks; you must request it if you want them to.
  • You will receive a Form 1099-G in the mail showing the total unemployment you received, which you use to file your return.
  • If you did not have taxes withheld and expect to owe, you can make quarterly estimated tax payments to avoid penalties.
  • Some people owe nothing on unemployment benefits if their total income falls below the standard deduction for their filing status.

Federal income tax withholding and how to request it

When you file for unemployment, most state agencies ask whether you want federal income tax withheld from your payments. The default answer is usually no. If you say yes, the state will withhold 10 percent of each check and send it to the IRS on your behalf.

Withholding 10 percent does not may provide you will owe exactly that amount in taxes. It is simply a way to reduce what you owe at tax time. If you earn other income during the year, or if your unemployment was high enough that 10 percent does not cover your actual tax liability, you will still owe more when you file. If you had too much withheld, you will receive a refund.

You can request withholding at the time you file for benefits, or you can change your withholding choice later by contacting your state unemployment office. Some states allow you to change it online; others require a phone call or form submission. Check your state's unemployment website for the current process.

State income tax on unemployment benefits

Nine states do not have a state income tax at all: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire. If you live in one of these states, you owe no state income tax on unemployment benefits.

In the other 41 states and Washington, D.C., unemployment benefits are subject to state income tax. Some states withhold automatically; most do not. You will need to report your unemployment income on your state tax return whether or not taxes were withheld from your checks.

State withholding rates and rules vary. Some states withhold a flat percentage; others calculate withholding based on your expected tax liability. Contact your state's unemployment office or tax department to learn what applies to you, or check your state's website for a withholding calculator.

Form 1099-G and reporting your unemployment income

In January or February of the year after you received unemployment, your state will mail you a Form 1099-G. This form shows the total unemployment benefits you received in the previous year, broken down by quarter. It also shows any federal or state income tax that was withheld.

You must report the amount shown in Box 1a of the Form 1099-G on your federal tax return, even if no taxes were withheld. You will also receive a copy that goes to the IRS, so the IRS will know you received the income whether or not you report it. Failing to report it can result in penalties and interest.

Keep your Form 1099-G with your tax records. If you did not receive it by early March, contact your state unemployment office to request a copy. You will need it to file your return accurately.

Calculating what you owe on unemployment income

The tax you owe on unemployment depends on your total income for the year and your filing status. The IRS allows a standard deduction — an amount of income you can earn without owing federal tax. For 2024, the standard deduction is $14,600 for single filers and $29,200 for married couples filing jointly. These amounts change each year.

If your only income was unemployment benefits and the total was less than your standard deduction, you owe no federal income tax. If your unemployment plus any other income exceeds your standard deduction, you owe tax on the amount above it.

For example: a single person who received $12,000 in unemployment and earned $5,000 from part-time work has $17,000 in total income. Their standard deduction is $14,600. They owe tax on $2,400 ($17,000 minus $14,600). The actual tax owed depends on the tax bracket for that amount.

Use the IRS tax tables or a tax calculator to estimate what you owe. The IRS website offers free tools, and many tax software programs will calculate this for you if you enter your income.

What to do if you cannot pay taxes owed on unemployment

If you owe taxes on unemployment benefits but do not have the money to pay when you file, you have options. You can file your return on time and pay what you can, then set up a payment plan with the IRS for the remainder. The IRS offers short-term payment plans (up to 180 days) at no cost, and longer-term installment agreements for a small fee.

You can also request an extension to file your return, which gives you more time to gather money or arrange a payment plan. An extension does not extend the time to pay taxes owed — interest and penalties continue to accrue — but it prevents a failure-to-file penalty.

Contact the IRS directly at 1-800-829-1040, or visit irs.gov to set up a payment plan online. If you are having financial hardship, you may also be able to request a temporary delay in collection while you get back on your feet.

Estimated tax payments if you expect to owe

If you know you will owe a large amount of tax on unemployment and did not have taxes withheld, you can make quarterly estimated tax payments to the IRS throughout the year. This reduces what you owe at tax time and helps you avoid penalties for underpayment.

Estimated payments are due on April 15, June 15, September 15, and January 15 of the following year. You calculate one-quarter of your expected annual tax liability and pay that amount each quarter. The IRS provides Form 1040-ES to help you calculate estimated payments.

You can pay estimated taxes online through the IRS website, by mail, or by phone. If you miss a payment or pay less than required, you may owe a penalty when you file your return, but making the payments still reduces your total tax bill.

Frequently Asked Questions

Do I have to report unemployment benefits if I did not receive a Form 1099-G?

Yes. You must report all unemployment income you received, even if you did not receive a Form 1099-G. If the form does not arrive by early March, contact your state unemployment office to request a copy. The IRS has a record of your benefits, so reporting them is important.

Can I deduct anything from my unemployment income?

No. Unemployment benefits are reported as gross income; you cannot deduct job search expenses, training costs, or other work-related expenses from the amount. You can only use the standard deduction or itemized deductions to reduce your taxable income, just as with any other income.

What if I received unemployment in one state but live in another?

You report unemployment income to the state where you worked when you received it, not where you currently live. You may owe tax to both states depending on their rules. Check both your work state and your current state's tax websites, or consult a tax professional if you are unsure.

Will receiving unemployment benefits affect my tax refund?

Unemployment benefits themselves do not affect your refund. Your refund depends on how much tax you paid throughout the year (through withholding or estimated payments) compared to what you actually owe. If you had taxes withheld from unemployment, that counts toward your total payments.

Can I file my taxes without reporting unemployment if no one asks?

No. The IRS receives a copy of your Form 1099-G and will know you received the income. Filing without reporting it can result in penalties, interest, and an audit. It is always safer and simpler to report the income accurately.