If you’ve lost your job you may be eligible for unemployment tax credits and benefits.
- Unemployment Insurance
Unemployment Insurance (UI) is a joint federal-state program run by the United States Department of Labor. If you have become unemployed through no fault of your own and meet other eligibility requirements, you may be eligible for up to 26 weeks of unemployment compensation. Under certain circumstances when unemployment rates are particularly high, you may be eligible for additional unemployment compensation under the Extended Benefits program, which may add up to 20 additional weeks depending on the state.
- Earned Income Tax Credit
You may be able to use the Earned Income Tax Credit (EITC) to claim a tax credit if your period of unemployment has taken a big bite out of your earnings. Most of your income must be below certain limits. Those limits depend on whether you’re a single filer or are married filing jointly, as well as how many children you have.
- Withdrawing from Retirement Plans
In an extreme case, you may be able to withdraw money from retirement plans like IRAs and 401(k)s. Since you may have to pay a 10 percent withdrawal penalty if you are withdrawing before age 59 1/2, this route should be taken only as a last resort. However, the IRS may waive penalties for hardship withdrawals to cover costs related to unforeseen expenses, such as medical expenses or preventing foreclosure on a primary residence.
To learn ways to replace some missing income from your paycheck when unemployed, read our Supplemental Income Ideas article.