Are New Jersey unemployment benefits taxed?

Your 1099-G is the form that puts New Jersey Unemployment Insurance benefits on your federal return. It shows the benefits paid to you during the year and any federal income tax withheld from them, and nothing is withheld from those weekly payments unless you ask for it.

Your 1099-G, and when you get it

NJDOL makes your 1099-G information available in your online account no later than January 31. Log in, go to My Account, then Tax Forms, and download it. NJDOL sends the same information to the IRS, so the amount you report should match the amount the form shows.

Ways to reach NJDOL has its other contact routes.

How to report a 1099-G on your federal return

The IRS treats state unemployment insurance benefits as unemployment compensation, and generally you must include in income all unemployment compensation you receive.

Report the amount shown in Box 1 of your 1099-G on line 7 of Schedule 1 of Form 1040, and include the federal income tax withheld in Box 4 on line 25b of Form 1040 or Form 1040-SR. The IRS page on unemployment compensation carries the rest of the instructions.

What New Jersey does not tax

NJDOL states that although the state of New Jersey does not tax Unemployment Insurance benefits, they are subject to federal income taxes.

New Jersey's Division of Taxation holds the state side of that answer. It lists unemployment compensation among the income exempt from New Jersey income tax, alongside Social Security benefits and the state's temporary disability and family leave benefits.

Having 10% withheld, and changing it later

To help offset your future tax liability, you may choose to have 10% of your weekly Unemployment Insurance benefits withheld and sent to the IRS. You can opt in when you first apply for benefits.

You can also select or change your withholding status at any time by signing in to your online account. Go to My Account, then Federal Tax Withholding, to see where you stand now or to make a change.

There is a paper route as well: fill out NJDOL's Request for Change in Withholding Status and mail it to the New Jersey Department of Labor and Workforce Development, Unemployment Insurance, PO Box 908, Trenton, NJ 08625-0908. Either way, the change applies only to future payments.

Tax on New Jersey's other benefit programs

New Jersey taxes none of its benefit programs at the state level. The federal side reads the same for most of them, though what comes out of a weekly payment differs by program, so name the program whenever you ask NJDOL about one.

Temporary Disability Insurance handles the deductions its own way. Social Security (FICA) and Medicare come out of those payments automatically, while federal income tax is withheld only if you request a weekly amount when you apply. The benefits are also federally taxable in the year the payments are issued, which may not match the year your leave happened.

The programs themselves, and who they are for, are on New Jersey disability and family leave benefits.