Unemployment income is taxable, and you may owe federal tax on it

Unemployment benefits count as income to the IRS. You do not automatically pay tax when you receive the money — the state does not withhold it unless you ask. This means you may owe a tax bill when you file your return, even if no tax was taken out of your checks.

The amount you owe depends on your total income for the year, your filing status, and whether you had other income besides unemployment. A single person with only unemployment income might owe nothing. The same person with a part-time job and unemployment income might owe several hundred dollars.

You report unemployment on your federal tax return using Form 1040 and Schedule 1. The state sends you a Form 1099-G in January showing how much you received the previous year.

Key Takeaways

  • Unemployment benefits are taxable federal income, and you may owe tax on them even if no tax was withheld from your payments.
  • You can request tax withholding when you file your claim or later through your state's unemployment office, which removes a portion of each payment for taxes.
  • Your total tax bill depends on all your income for the year, not just unemployment, so having a job alongside unemployment changes what you owe.
  • You report unemployment income on Form 1040 when you file your federal return, using the amount shown on Form 1099-G that arrives in January.
  • Some states do not tax unemployment income at all, while others do, so your state matters as much as federal tax.

How to request tax withholding on your unemployment checks

Most states let you request that a percentage of each unemployment payment be withheld for federal taxes. This is optional — you do not have to do it. But if you do, the withheld amount goes to the IRS, reducing what you owe when you file.

The withholding rate is typically 10 percent of your weekly benefit amount. So if you receive $400 per week, $40 would be withheld, and you would get $360. That $40 is held and sent to the IRS on your behalf.

You can request withholding when you first file your unemployment claim, or you can add it later. Contact your state's unemployment office directly — by phone, mail, or their online portal — and ask to elect federal tax withholding. Some states let you do this online; others require a phone call or a form mailed in. The process usually takes a few days to take effect.

What happens if you do not request withholding

If you do not request withholding, no tax is removed from your payments. You keep the full amount each week. But when you file your tax return in April, you will owe tax on that full amount.

The amount you owe depends on your other income. If unemployment is your only income and you are single, you may owe nothing — the standard deduction for 2024 is $14,600, so income below that is not taxed. But if you also worked part-time or had self-employment income, your total income rises, and you will owe tax on the unemployment portion.

Many people discover they owe money they did not expect when they file. Setting aside money each week or requesting withholding prevents this surprise.

State unemployment tax varies by location

Some states tax unemployment benefits; others do not. This is separate from federal tax. Even if you owe federal tax, you may not owe state tax, or vice versa.

States that do not tax unemployment include Alaska, Florida, Illinois, Louisiana, Mississippi, Nevada, New Hampshire, Pennsylvania, South Dakota, Tennessee, Texas, Washington, and Wyoming. If you live in one of these states, you only owe federal tax on your benefits.

States that do tax unemployment usually allow you to request withholding the same way you do for federal tax. Contact your state's unemployment office to learn whether your state taxes benefits and whether you can request withholding.

How your other income affects what you owe on unemployment

Unemployment is added to any other income you had during the year — wages from a job, self-employment income, interest, dividends, or rental income. Your tax bill is based on the total.

If you worked part-time while receiving unemployment, your employer withheld tax from your paychecks. That withholding counts toward your total tax bill. So if you owed $800 in tax for the year but your employer withheld $900, you would get a refund of $100. If your employer withheld $600, you would owe $200.

This is why it matters whether you request unemployment withholding. If you have a job and are also receiving unemployment, requesting withholding on the unemployment reduces the amount you owe at tax time.

Form 1099-G and reporting on your tax return

In January, your state sends you Form 1099-G, which shows how much unemployment you received in the previous year. This form has boxes for federal unemployment income and, in some states, state unemployment income.

You use the amount on Form 1099-G to fill out your federal tax return. You report it on Form 1040, Schedule 1, line 8. If you used tax software, it will ask you for this number and fill in the form for you.

Keep your Form 1099-G with your tax records. If you file by mail, you do not send it to the IRS — you keep it. If you file electronically, you enter the information into your tax software, which transmits it to the IRS.

If you do not receive a Form 1099-G by early February, contact your state's unemployment office. You can still file your return without it if you know the amount, but having the form ensures the IRS has the same number you reported.

What to do if you cannot pay the tax you owe

If you file your return and owe tax on unemployment income but cannot pay it all at once, you have options. You can pay in installments through the IRS, or you can request a short-term extension to pay.

File your return on time even if you cannot pay. Paying late costs more in penalties and interest than filing late does. The IRS charges a failure-to-pay penalty of 0.5 percent per month on unpaid tax, plus interest. If you file on time but pay late, you avoid the failure-to-file penalty, which is steeper.

Contact the IRS at 1-800-829-1040 or visit IRS.gov to set up a payment plan. You can also work with a tax professional or a free tax preparation site to understand your options.

Frequently Asked Questions

Do I have to pay federal tax on unemployment if I only received benefits and had no other income?

It depends on how much you received. For 2024, if you are single and your only income was unemployment below $14,600, you owe no federal tax. If you received more than that, you owe tax on the amount above the standard deduction. Check your Form 1099-G to see your total.

Can I change my withholding request after I have already started receiving benefits?

Yes. Contact your state's unemployment office and ask to add or change your federal tax withholding. The change usually takes effect within a few days. You can also request to stop withholding if you initially asked for it.

What if my state taxes unemployment but I did not request withholding?

You will owe state tax when you file your state return. Like federal tax, you can request state withholding from your unemployment payments. Contact your state's unemployment office to add state withholding, or plan to pay the tax when you file your state return in April.

Will receiving unemployment affect my tax refund or cause me to owe more?

Unemployment is taxable income, so it increases your total income for the year. If you had withholding from a job, that withholding is applied to your total tax bill. Whether you get a refund or owe money depends on whether your total withholding (from your job and any unemployment withholding) is more or less than your total tax bill.

Do I report unemployment on my tax return if I did not receive a Form 1099-G?

Yes, if you received unemployment, you report it even without the form. Use the amount you remember or check your state's unemployment portal, which usually shows your payment history. Request a copy of Form 1099-G from your state if you need it for your records.