	Overview

All unemployment benefits including regular state Unemployment Compensation (UC), extended benefits (EB), Trade Adjustment Assistance (TAA), Disaster Unemployment Assistance (DUA), and railroad unemployment benefits are potentially subject to the federal income tax. For income tax purposes, all temporary benefits, such as the Emergency Unemployment Compensation (EUC08) benefits, are also included within this category. In addition to being subject to federal income taxes, in most states that have an income tax, unemployment benefits are taxed. Benefit claimants wishing to have federal income tax withheld from their UC benefits must file form W-4V, Voluntary Withholding Request . In 1982, Congress lowered the AGI thresholds for taxation of UC benefits. Congress made UC benefits fully taxable in the Tax Reform Act of 1986 ( P.L. As of the date of this report, no relevant legislation in the current Congress has been introduced.
Unemployment compensation (UC) benefits have been fully subject to the federal income tax since the passage of the Tax Reform Act of 1986 (P.L. 99-514). Under tax law, unemployment compensation is a broad category that includes regular state UC benefits, Extended Benefits (EB), Trade Adjustment Assistance (TAA) benefits, Disaster Unemployment Assistance (DUA), and railroad unemployment benefits, as well as the now expired Emergency Unemployment Compensation (EUC08) benefits.
Individuals who receive UC benefits during a year may elect to have the federal (and in some cases state) income tax withheld from their benefits. UC benefits are considered income and may be subject to federal income tax.
This report provides an overview of the taxation of UC benefits and legislation related to taxing UC benefits.