On a federal return, Form 1099-G amounts flow through Schedule 1 before reaching Form 1040. Unemployment compensation from Box 1 goes on Schedule 1, Line 7. Taxable state or local income tax refunds from Box 2 go on Schedule 1, Line 1. The Schedule 1 total then carries to Form 1040, Line 8 as part of your adjusted gross income. Federal income tax withheld, shown in Box 4, is added to your other withholding on Form 1040, Line 25b. Agricultural payments take a different path through Schedule F.
The one thing worth checking before you copy any numbers: not every dollar on a 1099-G is automatically taxable. The state refund in Box 2 in particular needs a quick test first.
Unemployment Compensation From Box 1
Report the full Box 1 amount on Schedule 1, Line 7. Unemployment compensation is taxable as ordinary income at the federal level, treated the same as wages.1Office of the Law Revision Counsel. 26 USC 85 – Unemployment Compensation From Schedule 1, Line 7 feeds into the Line 10 additional income total, which then lands on Form 1040, Line 8.2Internal Revenue Service. Unemployment Compensation
Reemployment Trade Adjustment Assistance (RTAA) payments shown in Box 5 are reported alongside your unemployment income on the same Schedule 1 line.
If You Had Federal Tax Withheld
Box 4 shows federal income tax that was withheld from your benefit payments. Include that amount with the rest of your federal withholding on Form 1040, Line 25b. You can set up withholding on future unemployment payments by filing Form W-4V with your state unemployment agency; the only rate available on unemployment is a flat 10%.3Internal Revenue Service. Form W-4V, Voluntary Withholding Request
If You Repaid Benefits
Repaying overpaid benefits in the same year you received them? Subtract the repayment from the Box 1 amount and report the net on Schedule 1, Line 7. If you repay in a later year after already reporting the income, and the repayment exceeds $3,000, Section 1341 of the tax code gives you a choice between a deduction in the repayment year and a credit for the tax you would have saved by never reporting it in the first place.4Office of the Law Revision Counsel. 26 USC 1341 – Computation of Tax Where Taxpayer Restores Substantial Amount Held Under Claim of Right For later-year repayments of $3,000 or less, there is generally no deduction available.
State and Local Tax Refunds From Box 2
The refund amount in Box 2 is reported on Schedule 1, Line 1, but only to the extent it is taxable. The amount is often zero.
If you took the standard deduction in the year you paid that state or local tax, the refund is not taxable at all, because you got no federal tax benefit from the payment to begin with.5Internal Revenue Service. 2025 Instructions for Form 1040 The same result applies if you itemized but deducted state sales tax instead of state income tax. In either situation, you can enter zero on Line 1 or leave it blank.
If you itemized and deducted state income taxes, the refund is taxable only to the extent the deduction actually reduced your federal tax, which is the tax benefit rule.6Internal Revenue Service. Rev. Rul. 2019-11 – Recovery of Certain Items Previously Deducted or Credited Compare the prior year’s total itemized deductions to the standard deduction you could have claimed that year. If itemized did not exceed standard, none of the refund is taxable. If itemized exceeded standard by more than the refund, the full refund is taxable. If itemized exceeded standard by less than the refund, only the excess is taxable. Publication 525 contains the worksheet.7Internal Revenue Service. Publication 525 – Taxable and Nontaxable Income
Box 3 on your 1099-G tells you which prior tax year the refund in Box 2 relates to. That matters because the taxability calculation uses the standard deduction and SALT rules in effect for that year, not the current year.8Internal Revenue Service. Instructions for Form 1099-G A blank Box 3 means the refund is for the immediately preceding year. You will need the longer method in Publication 525, rather than the simple worksheet, if the refund is for a year other than the one immediately before, if you owed alternative minimum tax that year, if you had unused credits, or if you made your last estimated state tax payment in the following year.5Internal Revenue Service. 2025 Instructions for Form 1040
Once you have the taxable portion, enter it on Schedule 1, Line 1.9Internal Revenue Service. Schedule 1 (Form 1040) – Additional Income and Adjustments to Income
Taxable Grants and Agricultural Payments
Box 6 reports taxable grants, including energy-related grants and grants from state, local, or tribal programs. These are generally taxable unless the authorizing legislation says otherwise.8Internal Revenue Service. Instructions for Form 1099-G Where a Box 6 grant goes depends on what it is for. Business-related grants are reported on the business income schedule that fits the activity. Grants connected to personal energy improvements are reported as other income on Schedule 1.
Box 7 reports USDA agricultural subsidy payments. Report these on Schedule F (Profit or Loss From Farming), Line 4a. Agricultural disaster payments go on Schedule F, Line 6a instead.10Internal Revenue Service. Instructions for Schedule F (Form 1040) The net farm income from Schedule F then flows back to Schedule 1 with your other additional income.
Quick Reference: Box to Line
- Box 1, unemployment compensation: Schedule 1, Line 7
- Box 2, taxable portion of state or local refund: Schedule 1, Line 1
- Box 4, federal income tax withheld: Form 1040, Line 25b
- Box 5, RTAA payments: Schedule 1, Line 7
- Box 6, taxable grants: Schedule 1 (other income) or the applicable business schedule
- Box 7, USDA payments: Schedule F, Line 4a (or Line 6a for disaster payments)
The Schedule 1 entries combine on Line 10 and carry to Form 1040, Line 8.9Internal Revenue Service. Schedule 1 (Form 1040) – Additional Income and Adjustments to Income
If the 1099-G Reports Benefits You Never Received
Fraudulent unemployment claims filed in someone else’s name have made bad 1099-G forms more common. If you receive a 1099-G for benefits you never applied for or collected, do not report that income on your return. Contact the state agency that issued the form, report the fraud, and request a corrected 1099-G showing zero benefits.11Internal Revenue Service. Identity Theft and Unemployment Benefits
File your return with only the income you actually received, even if the corrected form has not arrived. You do not need to send the IRS Form 14039 for unemployment identity theft alone; that form is only required if your return is rejected because someone else filed using your Social Security number, or if the IRS specifically tells you to submit one.11Internal Revenue Service. Identity Theft and Unemployment Benefits The Department of Labor keeps a list of state agency fraud contacts at DOL.gov/fraud.