5. Unemployment Benefits

Millions of Americans have received unemployment benefits during the coronavirus pandemic—many for the first time. While this type of compensation is considered an important lifeline during times of struggle, it could also result in an unexpected tax bill.

Yes, that’s right—you can also get taxed if you receive unemployment benefits. They are basically a form of income, therefore they are taxable at the federal level. Moreover, in some cases, unemployment compensations are subject to state taxes, too.

According to the IRS, these benefits, for the most part, include any amount received under state or federal unemployment compensation laws. This also applies to state unemployment insurance benefits and benefits paid to you by the District of Columbia or any state from the Federal Unemployment Trust Fund.