The unemployment tax break does not "reduce" your operating loss. An NOL (net operating loss) is the excess of allowable deductions over your taxable income, as in your self-employment loss of $40K. If your "net" unemployment income is zero, it has no affect on your NOL. "Net" unemployment income would be zero if the unemployment benefits you received was $10,200 or less. In other words, the unemployment tax break can increase your NOL, rather than "reduce" your operating loss.
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