EDD tax withholding & refunds with dependents - confused about unemployment taxes

Yes, unemployment benefits are considered taxable income, so any taxes withheld are treated similarly to taxes withheld from regular paychecks. When you file your taxes, those withholdings are counted toward your total tax paid for the year. If you have qualifying dependents, you may be eligible for tax credits like the Child Tax Credit which could result in you getting some or all of those withheld taxes back as a refund, depending on your total income and tax situation for the year. I'd recommend keeping the withholding option checked though. It's much easier than potentially owing a lump sum at tax time.

i did this last year and YES you can get those taxes back! i have 1 kid and got ALL my withheld EDD taxes back plus extra from the earned income credit. the key is having kids as dependents + not making too much money overall for the year.

STOP IMMEDIATELY and uncheck that box!!! The EDD is taking way too much from you! That looks like 10% which is WAY more than you'd owe with kids. You're basically giving the government an interest-free loan of YOUR money!!!

I wanted to clarify something important about unemployment and taxes: 1. Unemployment benefits ARE taxable income (federal level) 2. The standard withholding is 10% for federal taxes 3. Having dependents can help reduce your overall tax liability through credits like the Child Tax Credit 4. BUT unemployment benefits are NOT earned income, so they don't count toward the Earned Income Tax Credit calculation Whether you should withhold depends on your full financial picture. If unemployment is your only income and you have two qualifying children, you'll likely get most withholdings back. However, if you had other income earlier in the year or a working spouse, you might still owe taxes. Generally, it's safer to keep withholding and get a refund than to owe unexpectedly.

I had the EXACT same question last year when I was on unemployment! I have 3 kids and was stressing about the tax situation. I couldn't get through to EDD on the phone for DAYS trying to ask about this and other questions I had about my claim. It was beyond frustrating. I finally found this service called Claimyr (claimyr.com) that got me connected to an actual EDD rep in under 20 minutes. They have a video showing how it works: https://youtu.be/JmuwXR7HA10?si=TSwYbu_GOwYzt9km The EDD rep confirmed that yes, the withheld taxes get counted just like regular job withholdings when you file your taxes. With my 3 kids, I ended up getting all of it back plus more. It really depends on your overall yearly income though.

Everyone here is forgetting the pandemic changes are GONE now! Tax rules for 2025 are different! During COVID they had that partial exclusion where some unemployment wasn't taxable but that's OVER. ALL your unemployment is taxable now so keep the withholding!!!

Thanks everyone for all the helpful info! I think I'll keep the withholding checked since it seems safer than potentially owing taxes later. Just to clarify my situation - unemployment is my only income right now (laid off in January), and I'm a single parent with the 2 kids. So it sounds like I'll probably get most of the withheld taxes back when I file next year due to the child tax credits. One more question - does unemployment income affect other tax credits or benefits I might be eligible for? Like the child care credit? My kids go to daycare part-time while I job search.

one thing no one mentioned yet - if ur withholding taxes now but get worried about money later u can always change it! u can switch back and forth between withholding and not withholding anytime when u certify. so maybe keep it for now and see how ur finances go?

As someone new to unemployment benefits, I really appreciate all the detailed information everyone has shared here! I'm in a similar situation - just started my claim and was unsure about the tax withholding option. From what I'm gathering, it sounds like keeping the withholding is generally the safer choice, especially if you have dependents. The peace of mind of not potentially owing a large tax bill later seems worth it, even if it means giving the government an "interest-free loan" as someone mentioned. @Logan Chiang - your situation sounds very similar to mine (single parent, kids in daycare while job searching). The tip about keeping detailed records of job search activities for the Child and Dependent Care Credit is really helpful. I hadn't thought about that documentation aspect. Thanks to everyone for making this complex topic easier to understand for those of us navigating unemployment benefits for the first time!