When it comes to federal income taxes the answer is yes. Uncle Sam taxes unemployment benefits as wages. However up to $10,000. of unemployment compensation received in 2020 will be exempted from federal tax for people with adjusted gross earnings below $150,000. But for the state income tax it is contingent on where you live. The majority of states tax unemployment benefits completely. But some states do not tax them in any way (sometimes because the state doesn’t have an income tax), and a handful states only tax the benefits in part. A few states, just like the federal government for 2020 and 2021, are making exceptions from www.flowinglaw.com flowinglaw flowing law Website flowing law com their standard rules to help those who have lost their jobs due the pandemic.