If I receive unemployment insurance, are my benefits taxable?

Unemployment benefits are taxable income. They are subject to federal and state taxes (if your state taxes income). You can choose to withhold 10% in federal taxes from your benefits by completing a W-4V and giving the form to your unemployment office. Some states automatically withhold taxes; some states do not. Go to your state’s unemployment website to learn how they handle state taxes. You can also make an estimated tax payment to the IRS quarterly. Your state agency will give you a 1099-G that will report unemployment income and taxes paid on your unemployment income.

Everyone’s tax situation is different. But the rule of thumb is to have taxes withheld now, so it’s taken out in small chunks. Otherwise, you may have to make a large tax payment next year.


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