Federal income taxes generally yes. Uncle Sam taxes unemployment benefits as such as wages (although as much as $10,200 of unemployment payments received in 2020 is not subject to federal tax for those who have an adjusted gross income of less than www.worthtravel.co.uk worthtravel worth travel Website worth travel co uk $150,000). But for state income tax it is contingent on the state you reside in. A majority of states tax unemployment benefits. Certain states don’t tax unemployment benefits in any way, sometimes because they don’t have income tax. A few states may tax only a small portion of your benefits. A few states, just like the federal government in 2020 or 2021, are making exemptions in their normal rules in order to assist those who lost their jobs because of the pandemic.