Learn about tax treatment of unemployment compensation

Find out how unemployment compensation is treated for tax purposes in Massachusetts.

Unemployment compensation is the benefits you received as a laid-off employee, which generally include any amounts you received under any U.S. or state unemployment compensation law. Include this compensation in both federal and Massachusetts gross income in the year you received it.

For certain government payments, Form 1099-Gs are issued, which show you the full amount of your unemployment benefits during the year.

You may request to have your Massachusetts taxes withheld. If you choose not to have your state taxes withheld, you may pay estimated tax payments on this income.

Nonresidents are subject to Massachusetts income tax on unemployment compensation that is related to previous employment in Massachusetts.

Part-year residents are subject to Massachusetts income tax on unemployment received while a Massachusetts resident, whether related to employment inside or outside of Massachusetts.

Repaying unemployment compensation

If you repay some or all of the unemployment compensation in the same year you received the compensation, subtract the repaid amount from the total amount you received and include the difference in gross income. This happens when there's an overlap period in which you still receive unemployment even though you're employed.

If you repay the benefits in a following year, you can take a deduction as long as you paid tax on supplemental unemployment benefit income in the year you received it because you believed you had a right to it. Claim this deduction by reporting your supplemental unemployment benefits as income.

You must take the deduction in the year you repaid. If you have no income to apply the deduction to, you cannot use it in a later year.

Additional Resources for Repaying unemployment compensation

Reporting on original tax return

  1. Enter the amount you reported on either:
    • U.S. Form 1040, Line 19 
    • U.S. Form 1040A, Line 13, or
    • U.S. Form 1040EZ, Line 3
    On either MA Form 1, Line 8a or MA Form 1-NR/PY, Line 10a as well.
  2. If you elected voluntary withholding of Massachusetts state income taxes on unemployment compensation, include the amount you reported on Form 1099-G on either MA Form 1, Line 36 or MA Form 1-NR/PY, Line 41.
  3. Attach a copy of your Form 1099-G to your return.

When you're using an e-file application, you'll be notified that you did not report your unemployment compensation, or that the amount you reported does not match our records. If you indicate that you didn't have any compensation, the system will let you continue. However, your refund will be held up, and you'll receive a letter requesting that you submit documentation to verify the correct amount.

Documents to submit with abatement/amended tax return

  • A corrected Form 1099-G - Certain Government Payments
  • Documents that can prove the correct benefits

Additional Resources for Reporting on original tax return

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