Did you know? Unemployment benefits are taxable! With the passage of the CARES Act stimulus package earlier this year, the federal government added $600 to the normal state weekly unemployment benefits. Also, the number of benefit weeks were increased to a total of 39.
In many cases, workers are receiving unemployment benefits for the first time in their lives. And they may not be aware that the benefits are fully taxable for federal purposes. Potentially making matters worse, is that most states also tax unemployment benefits. As a result, folks may have a nasty surprisewhen it comes time to file their 2020 tax return next year.
Those workers who received unemployment benefits will be sent a Form 1099-G (Certain Government Payments) from the state that paid the benefits. This tax form shows the amount of unemployment benefits received and the amount of tax withheld, if any.
Unemployment Benefits – Not Taxable In All States
There are several states where unemployment benefits are not taxable. This is because they do not have a state income tax. Washington is one of these states. These states are:
- Alaska
- Florida
- Nevada
- South Dakota
- Texas
- Washington
- Wyoming
Seven states have state income tax, but do not tax employment benefits. They include:
- California
- Montana
- New Hampshire
- New Jersey
- Oregon
- Pennsylvania
- Tennessee
- Virginia
Two states exempt 50% of amounts above $12,000 (single taxpayer) or $18,000 (married taxpayers). They are:
- Indiana
- Wisconsin
If you’ve collected unemployment benefits this year, the impact on your tax bill will depend on few things. For instance:
- The amount of unemployment received,
- What other income you have,
- Whether you are single or married (and, if married, whether you and your spouse are both receiving unemployment benefits), and
- If you had or are having income tax withheld from benefit payments.
If you have questions about the taxation of unemployment benefits, please give this office a call at (360) 778-2901.
Foreclosure Tax Issues to Be Aware Of
