Is unemployment compensation taxable to the state that issued it or to the state of residence when it was received?

[warrenite41]

Client became unemployed in Colorado and received a 1099-G from Colorado and thereafter moved to Kentucky where he remained unemployed but collected the UC from Colorado. Should this be apportioned or is it all taxed to Colorado? This is especially important this year because Colorado will not follow the federal law allowing $10,200 to be excluded where applicable. I found the following at this link:

https://www.denverpost.com/2021/03/18/unemployment-tax-break/

Will Colorado offer the same tax break on unemployment earnings?

No. Colorado tax law does not allow the state to incorporate federal changes that are enacted after the last day of a taxable year, Daniel Carr, spokesman for the Colorado Department of Revenue said.

[Terry53029 · Accepted solution]

generally Income received will be taxed in state earned, and also in state of domicile. some states out east are going to war on this situation

[warrenite41]

I accepted this as the solution and then got to thinking that the unemployment compensation itself wasn't really earned in the domiciled state of Kentucky where the T/P lived for 7 months while receiving it. The basis for receiving it arose in Colorado where the T/P lived for 4 months. The T/P's driver's license was also issued in Colorado. Viewed as such, in regard to your information, this could really go either way. One question which could possibly help decide: Is unemployment actually considered as 'earned'? If yes, then I would be inclined to choose Kentucky, the state of domicile (most months where lived), to be the state where it should be taxed. I just read today that both KY and CO are 2 of 13 states that will tax the federally exempted U.C. If there is a choice in the matter, I would obviously choose the state with the lowest tax rate. (Colorado is 4.55% for 2020 and Kentucky is 5% flat tax)