Do I pay taxes on unemployment income?

Yes, unemployment compensation is taxable income and must be reported on your federal tax return. You will receive a Form 1099-G showing the total amount of unemployment compensation you received during the year, and you will need to include this amount on your tax return.

State unemployment compensation is also generally taxable, although some states do not tax unemployment benefits. If you received unemployment benefits from a state other than the one in which you reside, you may need to file a tax return for that state as well.

You may be able to have federal income tax withheld from your unemployment benefits when you apply for them. If you do not elect to have tax withheld, you may need to make estimated tax payments during the year to avoid underpayment of taxes.

It’s a good idea to consult with a tax professional or refer to IRS Publication 525, “Taxable and Nontaxable Income,” for more information on the taxability of unemployment benefits.

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