Many people have been asked this question: If I lost my job due to COVID-19, do I have to pay federal income tax on unemployment benefits?

The answer, at least for now, is “yes.” The Coronavirus Aid, Relief and Economic Security (CARES) Act authorizes extra unemployment benefits of $600 a week from April 5, 2020 until July 31, 2020 on top of regular unemployment benefits from the state. (An extension is being contemplated.) But the CARES Act does not include any special tax exemption for unemployment benefits.

Unemployment benefits are taxable at your regular tax rate. Do not forget to factor this into the equation.