Form 1099-G

P114: /tax-answers/what-is-1099-g/

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Meta Description: Form 1099-G reports unemployment compensation and state tax refunds. Box 1 shows unemployment taxable federally. File by January 31. 2025 rules inside.

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H1

Form 1099-G: Unemployment Compensation and State Tax Refunds

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ANSWER SECTION

Form 1099-G reports government payments including unemployment compensation, state income tax refunds, and certain taxable grants. State agencies must issue this form when payments exceed $10 for unemployment or when state refunds may be taxable. The form goes to both you and the IRS, so accurate reporting is essential to avoid underreporter notices.

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H2: Types of Income Reported on 1099-G

Box 1: Unemployment Compensation Reports total unemployment benefits paid during the year. Fully taxable at the federal level. Report on Schedule 1 (Form 1040), line 7.

Box 2: State or Local Income Tax Refunds Reports refunds of state or local income tax you received. Only taxable if you itemized deductions in the prior year and claimed a state tax deduction.

Box 3: Taxable Grants Reports government grants that are taxable income. Common for disaster relief grants not used for qualified disaster expenses.

Box 6: Taxable Grants for Disaster Relief Specific box for qualified disaster relief grants that exceed qualified expenses.

Box 7: Agriculture Payments Reports USDA payments to farmers. Generally taxable income reported on Schedule F.

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H2: Understanding Box 2: State Tax Refunds

Whether your state refund is taxable depends on your prior year return:

Taxable situation: You itemized deductions on Schedule A last year and claimed state income taxes as a deduction. The refund is taxable income up to the amount of state tax deducted.

Non-taxable situation: You took the standard deduction last year. State refunds are not taxable regardless of amount.

Partially taxable: If your refund exceeds the state tax deduction benefit you received, only the benefit portion is taxable.

Key Form: Schedule A (if you itemized deductions)

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H2: How to Report 1099-G Income

Unemployment (Box 1): Report on Schedule 1 (Form 1040), line 7. The total carries to Form 1040, line 8.

State Refunds (Box 2): If taxable, report on Schedule 1, line 1. Attach explanation if required.

Taxable Grants (Box 3 or 6): Report as "Other Income" on Schedule 1, line 8z.

Agricultural Payments (Box 7): Report on Schedule F (Form 1040) if you're a farmer.

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H2: Special Rules for 2025

Unemployment taxation: No federal exclusion currently applies for 2025 unemployment benefits. All unemployment compensation is fully taxable.

State taxation of unemployment:

• Taxed: Most states tax unemployment as regular income
• Not taxed: California, New Jersey, Pennsylvania, Virginia, and others exempt all or part of unemployment
• Check your specific state rules

Withholding on unemployment: You can elect to have 10% federal withholding from unemployment benefits using Form W-4V. If you didn't withhold enough, you may owe taxes when filing.

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H2: Related Tax Questions

For information on cancellation of debt reporting, see our 1099-C form guide covering when canceled debt becomes taxable income.

Learn about 1099 requirements for LLCs and independent contractors in our do LLCs get 1099 page.

If you had taxes withheld from government payments, review our backup withholding guide for recovery information.

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