It’s hard to lose your job. Times are tough, and it’s difficult to find new employment. To assist you with expenses such as rent, food, water and electricity, the government gives you the option to apply for unemployment benefits. Your unemployment benefits will serve as your source of income until you find a job. Are unemployment benefits taxable income? Yes, they are. The government takes 10% of your weekly benefits and gives it to the Internal Revenue Service. It may sound strange that the IRS are getting money out of your unemployment benefits. Back in 2009, the Tax Exemption for Unemployment Benefits Act exempted people from paying taxes on the first $2,400 of unemployment benefits that they receive. Unfortunately, the Act didn’t roll over to 2010, so this year, unemployment benefits are taxable income and will remain so indefinitely until the law is changed.