Tax Tips for the Unemployed: What You Need to Know

The information in this article is up to date for tax year 2025 (returns filed in 2026).

The U.S. Bureau of Labor Statistics recently reported that 7.5 million people were unemployed. Losing your main source of income can be devastating. However, your new tax status may make you eligible for tax breaks reserved for those with lower incomes. Unemployment benefits contribute to an individual’s adjusted gross income (AGI), and understanding your AGI is crucial for navigating tax obligations and qualifying for tax breaks. Here are some tax tips for the unemployed to help you maximize your refund and get through this rough patch.

File Your Unemployed Taxes, Even If It’s Optional

If you’re single, under 65 and earned more than $15,750 in 2025, you must file a tax return. Even if you aren’t required to file, it may be worthwhile to do it anyway. You may be eligible for a refundable credit like the Earned Income Tax Credit (EITC) which is worth up to $8,046 for certain families. Refundable credits can produce a refund even when you don’t owe taxes. Another reason to file your taxes is because if your previous employer deducted taxes from your pay, you may be able to get your money back.

Do Your Taxes Early to Get Cash Sooner

When you’re unemployed, every bit of extra cash counts. Filing your tax return early could mean a refund that helps you stay afloat until your next job. The IRS says the fastest way to get your refund is by e-filing and choosing direct deposit to your bank account. If your tax situation is simple, you can file your federal return for FREE with ezTaxReturn and get that refund in no time. Don’t wait—file early and get the money you need sooner!

How Unemployment Benefits Can Impact Your Taxes

Unemployment benefits are a vital source of financial support for individuals who have lost their jobs through no fault of their own. However, it’s important to understand that these benefits are considered taxable income by the federal government and most states. This means that you will need to report your unemployment benefits on your federal income tax return and pay federal income taxes on the amount you receive. Failing to account for this can lead to an unexpected tax bill, so plan accordingly. Make sure to set aside a portion (aim for 10%) of your unemployment payments to cover any potential tax liabilities. Alternatively, you can ask to have taxes withheld or make quarterly estimated tax payments on your unemployment benefits.

Claim All the Tax Credits You Can

Depending on how much money you earned before becoming unemployed, you may now be eligible for tax credits you weren’t able to claim before. Here are a few you may qualify for:

Earned Income Tax Credit (EITC) – The credit ranges from $649 to $8,046 depending on your filing status and number of children you claim. You don’t need to have a child to get the credit.
Child Tax Credit – Parents can get $2,200 for each qualifying child age 16 or younger.
Child and Dependent Care Credit – If you paid someone to watch your kids while you worked or looked for a job, you may be able to deduct a portion of your childcare expenses.

When you do your unemployed taxes with ezTaxReturn, we’ll help you find every credit and deduction you’re eligible for, so you get the biggest possible refund.

State and Local Taxes on Unemployment Benefits

In addition to federal income taxes, you may also be required to pay state and local taxes on your unemployment benefits. The tax rates and laws vary by state, so check with your state’s tax authority to determine if you owe state taxes on your unemployment benefits. Some states do not tax unemployment benefits at all, while others may only partially tax them. Understanding your state’s specific tax laws can help you better manage your finances and ensure you’re setting aside enough money to cover any potential tax liabilities.

Understand Your Unemployment Benefits Statement

When you receive your unemployment benefits, you will also receive a statement showing the amount of benefits you received and the amount of federal income taxes withheld. This statement is usually provided on a Form 1099-G, which you will need to report on your federal income tax return. It’s essential to review your statement carefully to ensure that the information is accurate and that you are not missing any important tax documents. If there are any discrepancies, contact your state’s unemployment insurance program immediately to get them resolved. Keeping accurate records will help you avoid any issues when it’s time to file your taxes.

Get Assistance from the Government When You’re Unemployed

If you’re unemployed and struggling, don’t hesitate to ask for help. The government offers several programs designed to assist with food, housing, healthcare, and other essential needs. Here are some programs you can look into:

Food – Supplemental Nutrition Assistance Program (SNAP)
Healthcare – Medicaid; Children’s Health Insurance Program (CHIP)
Housing – Subsidized Housing, Housing Vouchers, and Public Housing programs. You may also qualify for the Low Income Home Energy Assistance Program (LIHEAP) for help with heating and cooling costs.
Financial Assistance – Welfare or Temporary Assistance for Needy Families (TANF); Supplemental Security Income (SSI).

If you’re unemployed and in need, take the time to find out which programs you’re eligible for and apply for assistance to help you through this challenging time.

Filing taxes as an unemployed individual can be overwhelming, but with ezTaxReturn, it’s simple and stress-free. Our easy-to-use software guides you through each step, ensuring you claim all eligible credits and deductions to maximize your refund. Whether you need help with unemployed taxes or filing for the first time, ezTaxReturn is here to support you.

Start Filing with ezTaxReturn

Frequently Asked Questions

Do I have to file taxes if I’m unemployed?

Yes. Even if you lost your job, you may still need to file a tax return depending on your income, filing status, and age. Many unemployed taxpayers still meet the filing threshold, and filing can help you claim valuable credits.

Are unemployment benefits taxable?

Yes. Unemployment compensation counts as taxable income at the federal level and must be reported on your tax return. It also contributes to your Adjusted Gross Income (AGI), which affects your eligibility for certain tax breaks.

Can unemployment affect my tax refund?

It can. Because unemployment benefits are taxable, they may reduce your refund or increase the amount you owe, especially if you didn’t have taxes withheld from your benefits.

What tax credits can unemployed people qualify for?

A drop in income may make you eligible for credits such as the Earned Income Tax Credit (EITC), the Child Tax Credit, or education credits. Lower income often increases eligibility for these benefits.

Do I need to report income from part‑time work, gig jobs, or freelance work while unemployed?

Yes. Any money earned from side gigs, contract work, or part‑time jobs must be reported, even if you didn’t receive a 1099 form.

Can I deduct job‑search expenses?

Job‑search expenses are no longer deductible for most taxpayers. However, you may still qualify for other deductions or credits depending on your situation.

Do public assistance benefits count as taxable income?

Many public benefits such as food assistance or certain utility support programs are not taxable. These programs can help reduce expenses without increasing your tax bill.

Should I file even if my income is below the requirement?

Yes, in many cases it’s still beneficial. Filing may allow you to claim refundable credits or get back taxes that were withheld earlier in the year.

Can ezTaxReturn help me file taxes if I’m unemployed?

Yes. ezTaxReturn guides you step‑by‑step, helps you report unemployment income correctly, and ensures you claim any credits you’re eligible for so you can maximize your refund.