The Basics of Unemployment Benefits

January 21, 2025

A fact of life in today’s world is that job loss can happen to practically anyone. Finding yourself unexpectedly unemployed is the chief reason financial planners recommend keeping an emergency fund of cash equal to between three and six months of essential living expenses. Fortunately, our individual cash resources are not the only resource we can fall back on if we find ourselves suddenly out of work due to a layoff or downsizing.

What are unemployment benefits?

Thanks to a joint program between the federal government and the states, unemployment insurance provides a limited amount of financial benefits payable to workers who find themselves out of a job through no fault of their own. These benefits are largely funded by payroll taxes levied on employers by the states. Voluntarily leaving a job, retiring, or accepting an early retirement package, however, would not qualify one to receive unemployment benefits.

How much can you receive?

Unemployment payments are not designed to replace all of the income lost due to a job displacement, but they can provide cash flow to help pay for some essential expenses, such as food, rent, etc. The amount of one’s benefit can vary substantially from state to state.

In general, you might receive an amount up to approximately half of your previous salary, although this amount may be further capped by the average earnings of workers in your state. Unemployment benefits are also subject to federal income tax. At the time you file your claim, you may request to have up to 10% of your benefit withheld for federal income tax purposes.

How long can you get benefits?

Workers in most states can generally receive unemployment benefits for up to 26 weeks. Massachusetts and Montana provide a few weeks more. Nine states currently provide fewer than 26 weeks of benefits, although this often changes with the economy: Arkansas, Michigan, South Carolina, Missouri, Idaho, Kansas, Alabama, Florida, and North Carolina. There are also periods when Congress has voted to extend the availability of unemployment benefits in particularly difficult economic times. You can find more on unemployment benefit periods at the Center on Budget and Policy Priorities.

How to apply for unemployment benefits

Immediately after becoming unemployed, contact your state’s unemployment office to file your unemployment claim. You can find web links and contact information for each state’s unemployment agency at the CareerOneStop website managed by the U.S. Department of Labor. Even if you know your termination date is coming, you cannot file for unemployment benefits until after you actually work your last day.

If you worked in a state other than the state where you reside, or if you worked in more than one state, contact the state unemployment office where you live for guidance.