How do I know how much unemployment benefit is taxable?

[amandachan1989]

Hello,

How do I know if I owe any additional state or local taxes for my weekly unemployment benefits?

Thank you!

[AdamNe]

Hello! 

Depending on the state returns you are required to file, your tax situation with regard to your unemployment benefits may be varied. Here are two helpful links: 

First, an article that details each state's conformity with the exclusion of $10,200 of unemployment income in your 2020 tax return passed as part of the American Rescue Plan Act:

https://ttlc.intuit.com/community/internal-revenue-service/help/how-is-my-state-taxing-unemployment-...

Next, an article that explains whether you need to file an amended tax return if the handling of your unemployment income was changed after you filed your tax return this year:

https://ttlc.intuit.com/community/state-taxes/help/do-i-need-to-amend-my-state-return/00/2134732

If you let me know which state you live in (or have unemployment income from), and whether you have already filed your tax return, I can give you some more specific information about what you may or may not need to do now. 

[amandachan1989]

Hell! @AdamNe

I just filed a new unemployment claim starting September 2021 since I was laid off on 8/26. 

I work and reside in New York City, NY. 

Thank you so much for all your help!! 

[Akil C]

Hi Amanda!

Thanks for your question! The is.....it depends.

For federal purposes, you must look at the other income on your tax return and determine whether your total income is greater than the standard/itemized deduction. For example in 2021, if you're single, and your unemployment + other income is less than the standard deduction of $12,550, you wouldn't owe any tax on your unemployment. However, if your total income exceeds $12,550, then your unemployment would be taxed at the regular tax brackets. For 2021, the federal government hasn't said yet whether they will exclude any unemployment compensation from adjusted gross income, so for now, I would include all unemployment when determining your total income. 

Since most states and localities start with the federal taxable income, in most cases, the amount of unemployment taxable at the federal level will also be taxable at the state/local level.  However, each state's tax law will determine whether it is taxed or not. For example California does not tax unemployment at all, but many states do.  Check out this article to see how unemployment is taxed in your state and locality. 

Please let me know if you have any more specific questions for me. I'd be happy to assist you. 

Thanks,

Akil C

[AdamNe]

Thanks for the reply, @amandachan1989 

When you started your claim, you will have been given the option to withhold federal, state and local taxes from your unemployment benefits. It is recommended you do so to avoid owing taxes when you file your return. If you have a choice of withholding rates, you can choose based on your estimated tax bracket: 

Federal Brackets 2021

State Brackets 2021

You can also use our TaxCaster to estimate your tax liabilities. This can take into account all your sources of income, along with tax payments and withholding: 

TaxCaster

[amandachan1989]

Hi @AdamNe , 

Thank you for all this!

I did also check with my NY Dept. of Labor claims office and they confirmed they are withholding 10% for federal tax, and 2.5% for state tax. 

Any potential local NYC taxes would be determined with my accountant. 

To be safe should I just set aside 4% for NYC taxes from each week's unemployment check? 

Thank you again! 

[AdamNe]

@amandachan1989 

Yes, I would suggest putting away some percentage (4-5% will definitely help!) of the check to cover any NYC taxes that may apply. Your NYC taxes are calculated within your NY state return (on a separate form, but they come out as one balance due). 

You may consider also paying that amount as an estimated tax payment for the 4th quarter, due on January 18th to avoid any possible underpayment penalties. https://www.tax.ny.gov/pit/estimated_tax/estimated_tax_payment_due_dates.htm Any amount that you overpay will be returned in the form of a tax refund. 

[Fox110]

I have a question. I received 15,000 in unemployment for 2020 but never knew it because I thought I was denied and just got it when they sent an email saying if I didn't claim it I would lose it.  So now it's been years and since i didn't know I never added it to my taxes back then.   Whats going to happen.  How can I figure out what I owe. I believe that year I only made a total of under 20k before the unemployment. 

[MarilynG1]

If you received the unemployment income in 2024, you will report it on your 2024 return.

You should get a Form 1099-G to report the amount and any tax you paid.  If you didn't receive it, you can go to your state's unemployment site to get a copy.

When this income is added to your other income for 2024, you'll be able to see what you owe (depends on your total income).  

Here's How to Enter a 1099-G for Unemployment.

@Fox110