Do you pay tax on unemployment benefits in Minnesota?

DEED withholds tax only where you chose withholding when you applied, and that choice can still be changed inside your online account. The 1099-G it issues in January is the document both of your returns are built from.

Where to find your 1099-G

Your 1099-G shows the unemployment compensation paid to you during the year and any federal income tax withheld. DEED's version also carries the Minnesota state tax it withheld on your behalf and a summary of any overpayment you repaid.

In January, DEED mails a paper copy to the address listed in your account as of December 31, 2025. Mailings begin mid-January and finish by January 31, 2026. Those dates are the ones DEED has published for the most recent tax year, and the cutoff moves with each one, so change your address before the December cutoff if you have moved.

You do not have to wait for the post. To read the form online:

1. Log in to your online account.
2. Select View and Maintain My Account.
3. Select My 1099-G.

Choosing or changing what DEED withholds

When you applied for your benefit account, DEED offered these withholding options:

That preference can be changed later inside your online account. The IRS puts it as a pair: you can have federal income tax withheld by filing Form W-4V, or you may be required to make quarterly estimated tax payments instead.

Federal income tax on Minnesota unemployment benefits

The IRS says you must generally include all unemployment compensation you receive in your income. It is reported with Form 1040, on the additional income and adjustments schedule, and the federal tax DEED withheld is included on the return itself.

DEED cannot give tax advice. It sends federal questions to the Internal Revenue Service on 1-800-829-1040.

Minnesota state tax on your benefits

DEED's own tax page says unemployment benefits are taxable under both federal and Minnesota law. Of the withholding choices, only the 15% option covers Minnesota state tax, so a claimant who took the federal-only option may still owe Minnesota tax when the return is filed.

DEED sends Minnesota state income tax questions to the Department of Revenue on 651-296-3781.

If you repaid benefits you were overpaid

The benefit total on your 1099-G is every unemployment payment DEED made to you during the year. Repaying an overpayment does not reduce that total, so the form can show more than you kept.

The Minnesota Department of Revenue handles the repayment side. It confirms you may have to repay income that was included on a previous year's tax return, and how you claim the deduction depends on whether your repayment was less than, equal to, or greater than $3,000.

For a repayment of $3,000 or less, Revenue allows a miscellaneous itemized deduction on your Schedule M1SA, Minnesota Itemized Deductions, only where you claim Minnesota itemized deductions, and only for the part of your total miscellaneous deductions above 2% of your federal adjusted gross income. For a repayment of more than $3,000, Revenue lets you choose whichever gives the greater tax benefit, a deduction on that same Schedule M1SA or a credit on Schedule M1REF, and repayments over $3,000 are not subject to that 2% floor. Denials, appeals, and overpayments covers how an overpayment arises and how DEED recovers it.

A 1099-G for benefits you never received

A 1099-G in your name for a claim you did not file points to an imposter account. Report it to DEED on its online fraud form, and file a report with the U.S. Department of Justice's National Center for Disaster Fraud as well.

Any fraudulent amount listed on a 1099-G form should not be included on your state or federal income taxes, and you can file your federal tax return before a corrected 1099-G reaches you. Where you were a victim of identity theft you will not have to pay the money back, and your employer is not charged for benefits paid because of the fraud.