Unemployment & Taxes

Unemployment & Taxes

Unemployment and Taxes

  • Unemployment compensation generally includes any amounts received under the unemployment compensation laws of the United States or of a specific state. It includes state unemployment insurance benefits, railroad unemployment compensation benefits and benefits paid to you by a state or the District of Columbia from the Federal Unemployment Trust Fund. It does not include worker’s compensation.
  • Normally, unemployment benefits are taxable; however, under the Recovery Act, every person who receives unemployment benefits during 2009 is eligible to exclude the first $2,400 of these benefits when they file their federal tax return.
  • For a married couple, if each spouse received unemployment compensation then each is eligible to exclude the first $2,400 of benefits.
  • You should receive a Form 1099-G, Certain Government Payments, which shows the total unemployment compensation paid to you in 2009 in box 1.
  • You must subtract $2,400 from the amount in box 1 of Form 1099-G to figure how much of your unemployment compensation is taxable and must be reported on your federal tax return. Do not enter less than zero.