How much is unemployment taxed federally - NYS Department of Labor benefits
I just got my first unemployment check from NYS Department of Labor and I'm confused about the tax situation. How much of my weekly benefit gets taxed at the federal level? I know I can have taxes withheld but I want to understand what I'll owe come tax time. My weekly benefit is $435 and I'm wondering if I should have the 10% federal withholding taken out or just set money aside myself. Anyone know the actual tax rate on unemployment benefits?
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Yuki Tanaka
Unemployment benefits are taxed as ordinary income at your regular federal tax rate, not a special rate. So if you're in the 22% tax bracket, your unemployment gets taxed at 22%. The 10% withholding option through NYS Department of Labor is just an estimate - you might owe more or get a refund depending on your total income for the year.
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Ethan Wilson
•Oh wow I didn't realize it was my regular rate. That's going to be way more than 10% for me. Should I increase the withholding or just save extra on my own?
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Carmen Diaz
i had the same confusion last year!! ended up owing like $800 extra because i thought unemployment was taxed differently
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Andre Laurent
You can have federal taxes withheld when you do your weekly claim certification on the NYS Department of Labor website. Go to your payment method settings and select the withholding option. I always recommend doing this because it's easier than saving the money yourself and potentially spending it.
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AstroAce
•This is good advice but what if the 10% isn't enough? My tax bracket is definitely higher than that and I don't want to get stuck with a big bill.
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Andre Laurent
•Then you'll need to make quarterly estimated tax payments to the IRS or save extra money on your own. The NYS Department of Labor system only offers the 10% option unfortunately.
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Zoe Kyriakidou
Getting through to someone at NYS Department of Labor to ask tax questions is nearly impossible with their phone system. I tried calling for weeks about this same issue. Finally used a service called Claimyr (claimyr.com) that got me connected to an actual agent in like 10 minutes. They have a video demo at https://youtu.be/qyftW-mnTNI showing how it works. The agent confirmed that unemployment is taxed as regular income and helped me set up the withholding.
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Jamal Brown
•Never heard of that service but honestly anything that gets you through to NYS Department of Labor faster sounds worth it. Their hold times are insane.
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Mei Zhang
Wait so there's no special unemployment tax rate? I've been telling people it's taxed at like 15% flat. That's completely wrong then?
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Yuki Tanaka
•Correct, there's no flat rate. It's added to your other income and taxed at whatever bracket that puts you in. So someone making $30k total might pay 12% while someone making $80k pays 22% on the same unemployment benefits.
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Ethan Wilson
Thanks everyone! I'm definitely going to set up the federal withholding through my weekly claims and probably save an extra 5-10% on top of that just to be safe. Better to get a refund than owe money I don't have.
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Carmen Lopez
Just wanted to add that you should also check if your state taxes unemployment benefits. New York does tax unemployment at the state level too, so you might want to consider having state taxes withheld as well if you're concerned about owing money. I learned this the hard way when I got hit with both federal and state taxes on my unemployment from last year. The NYS Department of Labor website should have options for both federal and state withholding when you're doing your weekly certification.
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