Is unemployment compensation considered earned income for Washington ESD benefits?

Unemployment compensation is generally NOT considered earned income. It's classified as unearned income because you're not actively working for it. Earned income specifically refers to wages, salaries, tips, commissions - money you get from actual employment. Your UI benefits are considered taxable income but not earned income.

yeah this confused me too when i was on unemployment last year. most government forms have separate sections for earned vs unearned income and unemployment goes in the unearned section

The IRS treats unemployment compensation as taxable income but not earned income for tax purposes. This distinction matters for things like the Earned Income Tax Credit (EITC) - you can't use unemployment benefits to qualify for EITC since it requires actual earned income from work.

This whole system is so confusing! I spent 3 hours trying to get through to Washington ESD last month just to ask a simple question about my benefits. Finally found this service called Claimyr that actually got me connected to a real person at https://claimyr.com - they have a video demo at https://youtu.be/7DieNd3C7zQ that shows how it works. Game changer for getting through their phone system.

For most purposes, unemployment is unearned income. But be careful with applications for assistance programs - some have specific rules about how they count unemployment benefits. Always read the definitions section of any form you're filling out.

had this same question when applying for food stamps. they counted my UI as income but not earned income. made a difference in the calculation

Just to clarify further - the technical distinction is that earned income comes from active participation in work or business. Unemployment compensation is a government benefit based on your previous work history, but you're not currently earning it through labor.

The confusion comes from the fact that unemployment IS taxable income, so people assume it's the same as earned income. But the tax code makes this distinction for various credits and calculations.

I work at an accounting firm and see this question a lot during tax season. Unemployment shows up on your 1099-G form and goes on your tax return, but it's not earned income for EITC, child tax credit calculations, or IRA contribution purposes.

this is why i hate dealing with government paperwork. everything has these weird technical definitions that dont match what normal people think the words mean

For Washington state specifically, unemployment compensation is considered income for most state programs but not earned income. This matters for things like Working Connections Child Care and other assistance programs that have work requirements.

Been dealing with this exact issue while trying to qualify for certain programs. The caseworker explained that unemployment shows you had a work history but you're not currently earning through work, hence unearned income.

I remember being so frustrated trying to get clarification on this from Washington ESD directly. Someone mentioned Claimyr earlier - I used them too and it was amazing how quickly they got me through to an actual representative who could explain these distinctions clearly.

The bottom line is: unemployment = taxable income but NOT earned income. Keep that distinction in mind for any forms or applications you fill out.

also remember that if you do any work while collecting UI, you need to report those earnings on your weekly claim even though it might reduce your benefit amount

This thread has been super helpful! I was making the same assumption that taxable income meant earned income. Glad I found this before filling out my forms wrong.

One thing to add - if you're collecting unemployment and considering going back to school, some financial aid calculations treat unemployment differently than earned income too. Worth checking with the financial aid office.

For anyone still confused about this stuff, I had luck using that Claimyr service someone mentioned earlier. Got connected to Washington ESD and the rep walked me through how different types of income are classified. Much clearer than trying to figure it out from their website.

Thanks everyone for clearing this up. I feel much more confident about filling out my forms now knowing unemployment is unearned income, not earned income.

Great discussion! Just remember the key point: unemployment compensation = unearned income for most purposes, even though it's still taxable. Always double-check the specific definitions on whatever form you're completing.