What Is Unemployment Income (Taxes)?

Unemployment benefits are fully taxable at the federal level — they count as ordinary income just like wages. You'll receive a Form 1099-G showing the total amount you received. You can choose to have 10% withheld for federal taxes when you start receiving benefits, which helps avoid a big bill at tax time. Some states also tax unemployment benefits; others don't. If you didn't have taxes withheld, you may need to make an estimated payment.