Job Loss & Unemployment: Tax Considerations (2025)

How unemployment compensation is taxed, options for COBRA or marketplace coverage, and strategies to manage tax impacts after job loss.

Unemployment Benefits

Unemployment compensation is taxable income and should be included on your return; consider having federal withholding from benefits to avoid surprises.

Retirement Options

Avoid early withdrawals from retirement accounts if possible; consider rollovers and hardship provisions carefully due to taxes and penalties.

Tax Planning

  • Adjust withholding or estimated payments if income changes
  • Check eligibility for premium tax credits on the marketplace
  • Keep careful records for unemployment and severance