Calculate Tax on Unemployment Benefits

By | December 12, 2013

How do I calculate the taxation on my unemployment benefits?

If after being laid off, you are collecting unemployment benefits, you still must pay tax on this income. Unemployment benefits do count as taxable income on your federal return, but your state may or may not tax unemployment income. If you are surprised, you’re not alone. Many people find this out only when they file their tax return. The following information will provide a rough guide on the right amount of tax for unemployment benefits owed to the IRS.


Unemployment compensation includes amounts received such as:

  • State unemployment insurance benefits
  • Benefits paid to you by a state or the District of Columbia from the Federal Unemployment Trust Fund.
  • Railroad unemployment compensation benefits
  • Disability benefits paid as a substitute for unemployment compensation
  • Trade readjustment allowances under the Trade Act of 1974 and
  • Unemployment assistance under the Disaster Relief and Emergency Assistance Act of 1974


Taxation of Unemployment Benefits

Unemployment benefits are not usually taxable on a state level. But on a federal level they would be taxed at the rate of the last tax bracket you were in with your previous job. Guessing at the median tax level, with median income. Things that effect the taxable amount of it is Total Other income, Kids, Dependency status and amount of exemptions. Use the tax table below as a reference.


2013 Tax Rates and Brackets Filing Status Single

$0 to $8,925*: 10%

$8,925* to $36,250: 15%

$36,250 to $87,850: 25%

$87,850 to $183,250: 28%

$183,250 to $398,350: 33%

$398,350 to $400,000: 35%

$400,000+: 39.6%

At the end of the year that you are receiving unemployment benefits, you will get a Form 1099-G (and so will the IRS) reporting what you’ve been paid.


Withholding Taxes on Unemployment Benefits 1099-G

You can also withhold taxes on unemployment benefits to make sure that you are not stuck with a huge tax bill at the end of the year.

Fill out Form W-4V,Voluntary Withholding Request to have 10 percent of your benefits withheld for federal income taxes. You can do this by typing your information directly on the form online, but then you need to make a copy and sign it. Send it to your state unemployment office and they will begin withholding this amount from your checks.


Calculate Tax on Unemployment Benefits and Pay Estimated Taxes

Depending on your circumstances, you might even be required to make quarterly estimated income tax payments, because you’re no longer having taxes withheld by your employer. Estimated taxes are what the IRS expects people to pay when their income is not subject to withholding, such as investment or self-employment income. Taxpayers will be required to submit payment to the IRS 4 times year