Are PA UC benefits taxable at the state level? Federal taxes taken out but unclear on PA taxes

Good question! Pennsylvania does NOT tax unemployment compensation at the state level. It's only subject to federal income tax. You don't need to worry about setting aside money for PA state taxes on your UC benefits. This is different from some other states that do tax unemployment benefits. Just make sure you're withholding enough for federal taxes (which it sounds like you are).

yep ur good with PA they dont take any. but dont forget some local municipalities might tax UC benefits depends where u live. i got hit with that surprise from my township last year lol

I can confirm that Pennsylvania state DOES NOT tax unemployment compensation. It's specifically excluded from PA taxable income. However, @casual_commenter is right that some local jurisdictions might tax UC through their earned income tax (EIT). You should check with your local tax office or municipality to be sure about local taxes. And just an FYI, make sure your federal withholding is adequate. The default 10% withholding might not be enough depending on your total yearly income and other factors. You might want to set aside a bit extra for federal taxes just to be safe.

When I got unemployment last year I found out the hard way that my township does take taxes from it. Had to pay at tax time. Check your local earned income tax rules. Some do some don't.

I just went through this whole tax situation last month! If you're worried about getting ahold of someone at PA UC to ask questions about taxes or anything else, I recommend trying Claimyr. It helped me get through to an actual agent after days of busy signals. You can see how it works at https://youtu.be/CEPETxZdo9E?si=WL1ZzVZWG3KiHrg2 - basically it keeps calling for you until it gets through, then calls you. The agent confirmed for me that PA doesn't tax unemployment but could answer all my other questions too. Worth checking out if you have other questions for them.

For Montgomery County specifically, it depends on which township/borough you live in. Some municipalities in MontCo have a local EIT rate that applies to unemployment, while others don't. You need to check with your specific township. As for reporting on the PA-40, you'll still need to report your UC benefits, but there's a specific line for excluding unemployment compensation from taxable income. The form instructions will guide you through it. The unemployment is reported but then subtracted from your taxable income.

Im in limbo with my claim still but when I was on UC before I remember there being a checkbox to withold taxes when I filed each week. Is that still a thing? I dont remember if it was just for federal or both tho

hope ur claim gets fixed soon @brief_reaction. mine took 8 weeks to get sorted and backpaid. hang in there

Just wanted to add another resource that might help - you can also check the PA Department of Revenue website directly for confirmation about unemployment tax exemptions. They have a specific section about what income is excluded from PA taxes, and unemployment compensation is clearly listed there. It's always good to have multiple official sources when dealing with tax questions. Also, if you end up owing any local taxes on your UC benefits, many townships will work with you on payment plans if needed - don't panic if you get hit with an unexpected bill.