How Much Is Unemployment Taxed in New York? Federal, State, NYC

Unemployment benefits in New York are taxed as ordinary income at the federal and state levels, and again at the city level if you live in New York City or Yonkers. How much unemployment is taxed in New York depends on your total income for the year and where you live, but most recipients end up losing between 14% and 27% of their benefits to taxes once every layer is counted. The state’s maximum weekly benefit is $869, and every dollar of it is taxable.¹

Federal Tax on Your Benefits

The IRS treats unemployment compensation as ordinary income under Internal Revenue Code Section 85.² There is no special rate for unemployment. The benefits get added to any wages, investment income, or other earnings you had during the year, and the total decides which brackets apply.

For 2026, a single filer pays 10% on the first $12,400 of taxable income, 12% on income up to $50,400, and 22% above that up to $105,700.³ Brackets are progressive: only the portion of income inside each range is taxed at that rate.

The standard deduction changes the picture significantly. It’s $16,100 for single filers and $32,200 for married couples filing jointly in 2026.³ If your only income for the year was 26 weeks at the maximum benefit rate, about $22,594, the standard deduction wipes out the first $16,100. That leaves roughly $6,494 subject to federal tax, or about $649 at the 10% rate. The bracket percentages look worse than the actual bill when unemployment is your only income. They start biting harder when wages from earlier in the year stack on top.

New York State Tax

New York State also taxes unemployment as income, using its own progressive brackets.⁴ The rates most claimants hit start at 4% on the first $8,500 of taxable income and reach 5.5% between roughly $13,900 and $80,650. Higher brackets exist but rarely apply to a year that included a stretch of unemployment.

New York’s standard deduction is $8,000 for single filers and $16,050 for married couples filing jointly, which similarly trims the amount actually subject to state tax.

If You Live in New York City

NYC residents owe a city income tax on top of federal and state. Rates run from 3.078% on the first $12,000 to 3.876% on income above $50,000 for single filers.⁵ Combined with federal and state, a single NYC resident in the mid-brackets can see a marginal rate approaching 25% or more on the upper portion of income.

If You Live in Yonkers

Yonkers residents pay a surcharge equal to 16.75% of their net state tax liability.⁶ That is 16.75% of what you owe New York, not 16.75% of your income. A $1,000 state tax bill means an extra $167.50 to Yonkers.⁷

Having Taxes Withheld From Each Check

When you file your claim, you can elect voluntary withholding. The federal option is a flat 10%, and no other percentage is available.⁸ New York State withholding is 2.5%. Together, that’s 12.5% off every payment. On the $869 maximum weekly benefit, withholding takes about $109 and drops the net to roughly $760.¹

You aren’t locked in. To change your withholding, log into labor.ny.gov, open Unemployment Services, select “Update My Personal Information,” and choose the tax withholding option. If the online system gives you trouble, call 1-888-209-8124.⁹

If You Skip Withholding

Without withholding, you’re responsible for paying tax yourself during the year. The IRS and New York State both expect quarterly estimated payments. For 2026:

April 15, 2026 (January through March)
June 15, 2026 (April and May)
September 15, 2026 (June through August)
January 15, 2027 (September through December)

Federal payments use Form 1040-ES.¹⁰¹¹¹² Both agencies also take online payments.

Missing estimated payments can trigger an underpayment penalty. The IRS generally waives it if you owe less than $1,000 after withholding and credits, or if you paid at least 90% of the current year’s tax or 100% of last year’s, whichever is less.¹³ If unemployment is your only income and the total tax owed will stay under $1,000, quarterly payments are optional.

Your 1099-G Arrives in January

Each January, the New York Department of Labor issues Form 1099-G, showing the total benefits paid to you the prior year and any tax withheld. The form for 2025 benefits becomes available in your labor.ny.gov account by mid-January 2026.¹⁴ The IRS gets a copy, so leaving the amount off your return will likely produce a notice.

If the number is wrong, submit the “Request for 1099-G Review” form through your online account, by fax, or by mail. The DOL will either issue a corrected form or send a letter explaining why the original stands.¹⁴ A 1099-G for benefits you never claimed is a sign of identity fraud, and the DOL has a separate process for that.

Two Things Unemployment Does Not Do

Unemployment does not count as earned income for the federal Earned Income Tax Credit. You can’t use benefits to qualify. Worse, because benefits raise your adjusted gross income, they can shrink the EITC you’d otherwise get from actual wages you had earlier in the year. If you’re counting on the credit, run the numbers before assuming.

Leaving New York doesn’t get you out of New York tax on the benefits. The state treats unemployment tied to New York employment as New York-source income no matter where you live now. You file a non-resident return on Form IT-203 and report the portion of benefits attributable to your New York wages, allocated in the same proportion if you split time between states.¹⁵ Your new state may tax them too, though most give a credit for tax paid to New York.

Paying Back Benefits You Weren’t Entitled To

Tax treatment of repayments depends on the amount. Repay more than $3,000 of benefits that were included in income in an earlier year, and you can either take an itemized deduction on Schedule A or claim a credit under the claim-of-right rules, whichever gives you the better result.¹⁶¹⁷

Repayments of $3,000 or less leave you with no straightforward federal recovery. Miscellaneous itemized deductions were eliminated after 2017.¹⁶

1
Department of Labor. What Is the Maximum Benefit Rate?
2
Office of the Law Revision Counsel. 26 USC 85 – Unemployment Compensation
3
Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
4
New York State Senate. New York Laws TAX Article 22 Part 1 601 – Imposition of Tax
5
Office of the New York City Comptroller. The NYC Personal Income Tax Before and After the Pandemic
6
eCode360. City of Yonkers, NY – Article IX Income Tax Surcharge
7
Department of Taxation and Finance. New York City, Yonkers, and MCTMT
8
Internal Revenue Service. Form W-4V, Voluntary Withholding Request
9
Department of Labor. NY.gov ID Frequently Asked Questions
10
Internal Revenue Service. About Form 1040-ES, Estimated Tax for Individuals
11
New York State Department of Taxation and Finance. Form IT-2105, Estimated Tax Payment Voucher for Individuals
12
Tax.NY.gov. Estimated Tax Payment Due Dates
13
Internal Revenue Service. Underpayment of Estimated Tax by Individuals Penalty
14
Department of Labor. 1099-G Tax Form
15
New York State Department of Taxation and Finance. Instructions for Form IT-203, Nonresident and Part-Year Resident Income Tax Return
16
Internal Revenue Service. Publication 525, Taxable and Nontaxable Income
17
Office of the Law Revision Counsel. 26 US Code 1341 – Computation of Tax Where Taxpayer Restores Substantial Amount Held Under Claim of Right