Why are unemployment wages taxable income, if federal and state unemployment taxes are deducted from my wages when I work?
The Federal Unemployment Tax (FUTA) is used only to cover the administrative expenses of unemployment, no benefits are paid out of those funds at all. Therefore, that tax money is excluded from the benefit pool. As to state unemployment. It works a lot like insurance, with all employees and employers paying in to fund the benefits. Therefore, when you receive unemployment benefits, it’s just like getting an insurance payout and should be taxed as income.
