Unfortunately, unemployment income is taxable on the federal, state and local level.  However, it is estimated that 37% of Americans do not know this and assume unemployment income is not taxable.  The recipient has to ask the Agency to withhold taxes or they will not.  Unemployment income is reported on a Form 1099-G. The standard rate for federal taxes in 10%.  If the recipient does not withhold taxes, he will probably have a large tax bill next April.  If the Agency does not withhold taxes for him, he should plan to pay Estimated Taxes to compensate.  If the recipient also receives the additional $600 per week federal stimulus payments, as of this writing, those will be taxable also.  There is some discussion in Washington about making these payments nontaxable.  Please note that the unemployed can get these extra payments for up to four months only.