If you received unemployment benefits in New York, your tax refund may be affected. Unemployment benefits are generally taxable as income, both on the federal and state level. This means that you may owe taxes on the unemployment benefits you received, and your refund may be reduced as a result. However, there are some circumstances where you may not have to pay taxes on your unemployment benefits. For example, if your total income for the year is below a certain threshold, you may not owe any taxes on your unemployment benefits. Additionally, if you received unemployment benefits for less than half of the year, you may be eligible for a tax refund. It’s important to consult with a tax professional or refer to official sources like the New York State Department of Taxation and Finance website for more information on your specific tax situation and to determine if you will get a tax refund if you were on unemployment in New York.
New York State Unemployment Taxability
The Empire State has some unique tax laws that can be tricky to navigate. One of the most common questions we get from New Yorkers is, “Will I get a tax refund if I was on unemployment in New York?” The answer to this question depends on a number of factors, including how much unemployment you received, whether or not you itemized your deductions, and whether or not you had any other income.
New York State Unemployment Benefits
New York State unemployment benefits are taxable by the state of New York. This means that if you received unemployment benefits in New York, you will need to report them on your state tax return. You can do this by filing Form IT-2104, Resident Income Tax Return.
The amount of unemployment benefits that you received will be reported on your Form 1099-G, Certain Government Payments. You will receive this form from the New York State Department of Labor.
Itemized Deductions
If you itemize your deductions on your tax return, you may be able to deduct some of your unemployment benefits. The deduction is limited to $10,200 for the 2022 tax year.
Other Income
If you had other income in addition to unemployment benefits, you may still be eligible for a tax refund. However, the amount of your refund will be reduced by the amount of other income that you had.
Table of Taxability
| Income | Taxability |
|---|---|
| Unemployment benefits | Taxable |
| Wages | Taxable |
| Interest | Taxable |
| Capital gains | Taxable |
| Social Security benefits | Not taxable |
If you have any questions about your New York State unemployment tax liability, you should contact the New York State Department of Taxation and Finance.
Federal Unemployment Tax Treatment
In general, unemployment benefits (including those received from the state of New York in 2023) are considered taxable income at the federal level. This means that you will need to report the amount of unemployment benefits you received on your federal income tax return and pay taxes on them.
- Federal income tax: Unemployment benefits are included in your total income when your federal taxable income is calculated. Based on your tax bracket, you will pay the corresponding federal income tax rate.
- Additional Medicare tax: In addition to federal income tax, you will also be subject to the 1.45% Medicare tax on your unemployment benefits.
However, it’s important to note that the American Rescue Plan Act (ARPA) enacted in 2021 included a provision that excluded up to $10,200 of unemployment benefits from federal income taxation for 2020. This exclusion was not extended for 2023, so the full amount of unemployment benefits received in 2023 will be subject to federal income tax.
In some cases, you may be eligible for a federal Earned Income Tax Credit (EITC) if you meet specific income and filing status requirements. The EITC is a tax credit that can reduce the amount of taxes you owe or increase your refund.
Tax Withholding
Withholding is taking a portion of your paycheck before you get it to pay taxes. Unemployment insurance is not subject to withholding for federal income tax, Medicare tax, or Social Security tax.
You can choose to have federal income taxes withheld from your unemployment benefits by completing and submitting Form W-4V to your state unemployment agency. However, it’s important to consider your individual tax situation and make sure that you have enough federal income tax withheld to avoid owing a large amount when you file your tax return.
Filing Your Tax Return
When you file your federal income tax return, you will need to report the amount of unemployment benefits you received on line 1 of the 1040 form. You can also use the Unemployment Benefits Worksheet in the Form 1040 instructions to help you calculate the taxable amount of your unemployment benefits.
If you are eligible for the EITC, you will need to complete the EITC worksheet in the Form 1040 instructions to determine the amount of credit you can claim.
State Unemployment Tax Treatment
The taxability of unemployment benefits at the state level varies by state. In New York, unemployment benefits are not taxable for state income tax purposes.
Tax Implications of COVID-19 Unemployment Benefits
Tax rules surrounding unemployment benefits have undergone significant changes due to the COVID-19 pandemic. Here’s an overview of how these benefits impact your taxes:
Federal Unemployment Tax
- Typically, unemployment benefits are taxable at the federal level.
- However, under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, up to $10,200 of unemployment benefits received in 2020 was tax-free for individuals with an adjusted gross income (AGI) of less than $150,000 ($300,000 for married couples filing jointly).
- For AGIs over these thresholds, the full amount of unemployment benefits is taxable.
State Unemployment Tax
- Unemployment benefits are taxable in most states.
- However, some states may offer a temporary exemption or credit for unemployment benefits received during the pandemic.
- Check with your state’s tax agency for specific rules and regulations.
Income Thresholds
| AGI Threshold | Tax-Free Amount |
|---|---|
| Less than $150,000 | $10,200 |
| $150,000-$300,000 | Progressively reduced |
| Over $300,000 | $0 |
Filing Status
Your filing status also affects the timing of your tax refund. If you receive unemployment benefits, you may need to file a tax return to claim the tax-free portion. This may result in a tax refund if you meet the eligibility criteria.
State Refund Policies for Unemployment Income
Whether or not you will receive a tax refund if you were on unemployment in New York depends on several factors, including your income, filing status, and deductions.
- Federal Income Tax: Unemployment benefits are generally not subject to federal income tax, so you will not typically receive a refund on your federal tax return based on these benefits.
- State Income Tax: In New York, unemployment benefits are not taxable at the state level, so you will not receive a state tax refund on this income.
Other Factors to Consider
- Income Level: If your income from sources other than unemployment benefits is below the standard deduction, you may still qualify for a tax refund, even if you did not receive unemployment benefits.
- Deductions: If you have itemized deductions that exceed your standard deduction, you may reduce your taxable income and increase your chances of receiving a refund.
- Dependents: If you have dependents, you may qualify for additional tax credits, which can also increase your refund.
And that’s a wrap, folks! We hope we’ve shed some light on the murky world of unemployment taxes. Now, if you’ll excuse us, we’re going to go enjoy the rest of our day without thinking about taxes. But, hey, if you happen to have any more burning tax questions, feel free to drop by again. We’re always happy to help our fellow tax enthusiasts out. Till next time, stay savvy and keep those refunds rollin’!