The IRS and Unemployment Insurance Benefits

Topic No. 418 Unemployment Compensation

The tax treatment of unemployment benefits you receive depends on the type of program paying the benefits. Unemployment compensation includes amounts received under the laws of the United States or of a state, 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
  • Unemployment assistance under the Disaster Relief and Emergency Assistance Act of 1974, and
  • Unemployment assistance under the Airline Deregulation Act of 1978 Program

If you received unemployment compensation during the year, you must include it in gross income. To determine if your unemployment is taxable, see Are Payments I Receive for Being Unemployed Taxable?