Guides
Form 1099-G Explained: Government Payments
Form 1099-G reports certain payments a government made to you during the year, most commonly unemployment compensation (Box 1) and state or local income tax refunds (Box 2). A federal, state, or local agency sends the form by January 31 and files a copy with the IRS. You use it to report taxable government payments on your Form 1040. Not every amount on the form is taxable: a state refund in Box 2 is income only if you deducted that tax and got a benefit last year.
The form covers eight kinds of payments, but two dominate real returns: benefits paid to people out of work, and refunds of state taxes they overpaid. The rest (grants, agricultural payments, paid family leave) apply to narrower groups. This guide walks each box, then explains the one rule that trips up most filers: when a state tax refund actually counts as income.
What Is Form 1099-G?
Form 1099-G, “Certain Government Payments,” is an information return a government unit files to report money it paid you. Agencies must send your copy by January 31 following the tax year and file with the IRS. The most common triggers are unemployment benefits and state or local income tax refunds, but the form also reports taxable grants, agricultural subsidies, and paid family leave.
You do not attach Form 1099-G to your return. You use the box amounts to fill in the right lines on Form 1040 and its schedules. Because the IRS receives a matching copy, an amount you leave off can generate an automated CP2000 notice proposing additional tax. Keep the form with your records even when part of it is not taxable.
Each box on Form 1099-G corresponds to a distinct type of payment. Reading the correct box matters because the tax treatment differs: unemployment in Box 1 is fully taxable, while a refund in Box 2 may be fully taxable, partly taxable, or not taxable at all.
Form 1099-G Boxes: What Each One Reports
The table below lists every box on the current Form 1099-G and where the amount generally lands on your federal return. Report only what the tax rules require, which for Box 2 depends on your prior-year deductions.
| Box | Reports | Federal treatment |
|---|---|---|
| 1 | Unemployment compensation | Fully taxable; report on Schedule 1, Line 7 |
| 2 | State or local income tax refunds, credits, or offsets | Taxable only if you deducted the tax and got a benefit (see below) |
| 3 | Tax year the Box 2 refund relates to (YYYY) | Identifies which prior year to test for taxability |
| 4 | Federal income tax withheld | Credit against tax; report as withholding on Form 1040 |
| 5 | Reemployment Trade Adjustment Assistance (RTAA) payments | Taxable; report as other income on Schedule 1 |
| 6 | Taxable grants (energy, tribal, and other government grants) | Generally taxable; often Schedule 1 or a business schedule |
| 7 | Agriculture payments (USDA subsidies) | Taxable; usually Schedule F |
| 8 | Checkbox: Box 2 relates to a trade or business income tax | Signals business, not personal, refund treatment |
| 9 | Market gain on Commodity Credit Corporation (CCC) loans | Taxable; typically Schedule F |
| 10a-10b | State and state ID number | Informational for state filing |
| 11 | State income tax withheld | Credit on your state return |
Box 10a on some year versions also carries state paid family and medical leave benefits; layouts shift year to year, so read the box label on the copy you receive rather than relying on box numbers alone.
Box 1: Unemployment Compensation
Box 1 shows total unemployment compensation paid to you during the year, including state benefits and Railroad Unemployment Insurance. This amount is fully taxable at the federal level. You report it on Schedule 1 (Form 1040), Line 7, and carry the total to Form 1040. There is no federal exclusion for unemployment in 2026 (the one-time 2020 exclusion has expired).
Combine Box 1 from every Form 1099-G you receive if you collected benefits in more than one state or program. If you repaid benefits during the same year, the states often net the repayment; if you repaid in a later year, you may deduct or claim a credit for the repayment separately.
Unemployment has no tax withheld unless you asked for it. You can elect voluntary federal withholding of a flat 10% on Form W-4V, which then appears in Box 4. Many recipients skip this and owe at filing, so estimated payments can prevent an underpayment penalty. See estimated tax payments for who must pay and when.
Box 2: State or Local Income Tax Refunds
Box 2 reports refunds, credits, or offsets of state or local income tax of $10 or more. Getting a refund does not automatically make it taxable. It is federal income only if you itemized deductions the prior year, deducted state income tax on Schedule A, and that deduction reduced your federal tax. Box 3 tells you which tax year the refund relates to, so you know which return to test.
If you took the standard deduction last year, none of the refund is taxable, because you never deducted the tax. The same is true if you itemized but chose to deduct state and local general sales tax instead of income tax. In both cases the refund produced no prior federal benefit, so it stays out of income.
When the refund is taxable, you report it on Schedule 1 (Form 1040), Line 1. The taxable amount is limited to the tax benefit you actually received, which is the point of the tax-benefit rule covered next. Whether to itemize at all is a separate annual choice; see standard vs itemized deduction.
The Tax-Benefit Rule: When a State Refund Is Taxable
The tax-benefit rule (IRC Section 111) says a recovered amount is income only to the extent the original deduction reduced your federal tax in the earlier year. Applied to a state refund: you include the refund in income only up to the benefit that the state-tax deduction gave you last year. If the deduction saved you nothing, the refund is not income.
Three common situations make a refund fully or partly nontaxable:
- You took the standard deduction. No Schedule A means no state-tax deduction, so the refund is not income.
- You itemized but deducted sales tax instead of income tax. The refunded income tax was never deducted, so it is not income.
- You were capped by the SALT limit. If your state and local taxes exceeded the deduction cap, part of the tax you paid gave no benefit, so the matching part of the refund is not income.
The SALT cap makes this common. Under the Tax Cuts and Jobs Act, the itemized deduction for state and local taxes was limited to $10,000 ($5,000 married filing separately) for 2018 through 2024. The One Big Beautiful Bill Act, signed July 4, 2025, raised the cap to $40,000 for 2025 (about $40,400 for 2026), with a phase-down for high incomes and a scheduled return to $10,000 in 2030. Rev. Rul. 2019-11 gives the IRS method for computing the taxable portion when the cap applies.
Worked example: In 2024 you paid $9,000 in state income tax and $4,000 in property tax, total $13,000, but could deduct only $10,000 because of the SALT cap. In 2025 the state refunds you $1,000 of income tax. Because $3,000 of your state and local taxes gave no benefit, and the $1,000 refund falls inside that unbenefited amount, none of the refund is taxable in 2025. Had you been under the cap, the full $1,000 would generally be income.
How to Report Form 1099-G on Your Return
Match each box to its line, then report only the taxable portion. The steps below cover the two most common boxes.
- Box 1 (unemployment): Enter the total on Schedule 1, Line 7, and carry it to Form 1040.
- Box 4 (federal tax withheld): Add it to your other withholding on Form 1040; it reduces tax owed dollar for dollar.
- Box 2 (state refund): Test the prior year. If you took the standard deduction, report $0. If you itemized and deducted state income tax, run the tax-benefit and SALT-cap limits, then report the taxable amount on Schedule 1, Line 1.
- Box 11 (state withholding): Claim on your state return, not your federal return.
If a box amount is wrong, or you receive a 1099-G for benefits you never got (a sign of unemployment identity fraud), contact the issuing agency for a corrected form before filing. Report suspected fraud to the state and to the IRS; do not report benefits you did not receive. For related income forms, see Form 1099-INT explained and Schedule 1 (Form 1040).
Frequently Asked Questions
Is a state tax refund on Form 1099-G taxable?
Only if you deducted the tax and got a federal benefit. If you took the standard deduction the prior year, or itemized but deducted sales tax instead of income tax, your Box 2 refund is not taxable. If you itemized and deducted state income tax, some or all of the refund is income the year you received it, limited to the tax benefit the deduction produced.
Where do I report Form 1099-G unemployment income?
Report Box 1 unemployment compensation on Schedule 1 (Form 1040), Line 7, then carry the total to Form 1040. It is fully taxable federally in 2026. Any federal tax withheld in Box 4 is added to your other withholding and reduces the tax you owe dollar for dollar when you file.
What is the tax-benefit rule for state refunds?
The tax-benefit rule (IRC Section 111) includes a recovered amount in income only to the extent the earlier deduction reduced your tax. For a state refund, you report it only up to the benefit the state-tax deduction gave you last year. If the SALT cap or the standard deduction meant the tax gave no benefit, the refund is not income.
Why did I get a 1099-G if I did not receive unemployment?
A 1099-G reporting unemployment you never collected is a common sign of identity theft, where someone filed for benefits in your name. Do not report the income. Contact the state agency that issued the form to request a correction and report the fraud, and notify the IRS. File your accurate return once the state confirms the error.
Does Box 4 on Form 1099-G mean I get money back?
Box 4 shows federal income tax already withheld from your government payments. It is a credit, not a refund by itself: it counts toward the tax you owe and can increase your refund or lower your balance due. Whether you get money back depends on your total tax versus total withholding and credits for the year.
What is the difference between Box 1 and Box 2 on a 1099-G?
Box 1 is unemployment compensation, which is fully taxable and reported as income. Box 2 is a refund of state or local income tax you paid, which is taxable only if you deducted that tax and received a benefit. Box 1 almost always creates income; Box 2 often does not, depending on your prior-year deductions.
Reviewed by The Ledgerism Editorial Team. Last reviewed: July 2026.