Can I Exclude Unemployment Benefits from My Income?

No — unemployment compensation is fully taxable as ordinary income at the federal level. You'll receive a Form 1099-G showing the total unemployment you received during the year. You can choose to have federal income taxes withheld from your unemployment checks at a flat 10% rate, or pay quarterly estimated taxes to avoid a surprise tax bill in April. Some states exempt unemployment from state income tax, but federal taxation is required. The temporary exclusion that existed in 2020 (for the first $10,200 of unemployment during COVID-19) was a one-time provision and does not apply to current years.