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Tax Tips for Unemployment Income If You’ve Been Laid Off or Furloughed

Unemployment benefits

While unemployment rates have decreased in America with an estimated 6.3 million claims for jobless benefits and the national unemployment rate just under 4 percent due to job loss or being furloughed, these are still unprecedented times and many Americans are struggling financially

To help provide relief for those impacted by coronavirus there were several coronavirus relief plans that also expanded unemployment benefits in 2020 and in 2021. 

If you are receiving unemployment checks, you may be wondering “what are the tax implications of receiving unemployment?” Here’s what you need to know:

How Unemployment Income is Taxed 

Typically, unemployment income is taxable and should be included in your income for the year, especially if you have any other income. Some states also count unemployment benefits as taxable income.

However, under the American Rescue Plan, the first $10,200 of federal unemployment income was tax-free for households with income less than $150,000. This provision would be retroactive ONLY for tax year 2020 (the taxes you likely filed in 2021).The bill also extended the Pandemic Unemployment Assistance (PUA), which expanded unemployment to self-employed, freelancers, and side giggers.

When it’s time to file your taxes, you will receive Form 1099-G which will show the amount of unemployment income you received. Form 1099-G will also show any federal taxes you had taken out of your unemployment pay.

Tax Tips for People Receiving Unemployment Income

Don’t worry about knowing these tax rules — TurboTax will ask you simple questions about you and give you the tax deductions and credits you’re eligible for based on your answers.

While unemployment can be scary and overwhelming, you don’t need to navigate it alone. We are here with help and advice on everything from managing your day-to-day finances to understanding what this means for your taxes, and you can learn more about unemployment benefits, unemployment insurance and unemployment eligibility at the TurboTax Unemployment Center.