Unemployment Compensation

• Unemployment compensation, including extended and emergency benefits, is classed as taxable income. This applies whether the money comes from federal or state funding. If you receive unemployment compensation in California it's not guaranteed you'll have to pay taxes on the money, as liability depends on overall income. However, unemployment benefits are counted in this overall income total.
  
  

Sales vs. Income Tax

• You can deduct the money that you pay in state income taxes from income for federal tax purposes. As of the date of publication, taxpayers had the choice of deducting state sales taxes instead of state income taxes.
  In California, state income tax starts at 1 percent, with additional brackets including 2 percent starting at income of $7,168; 4 percent starting at $16,694; and 6 percent starting at $26,821.
  Meanwhile the state applies a sale tax of 7.25 percent that can be topped up to 9.75 percent by local sales taxes. This is applied to tangible personal property: in other words, physical goods.
  While unlikely, it is conceivable an unemployed person in California may have paid more in state sales taxes than state income taxes and thus could benefit from deducting the sales tax.
  
  

Deductions

• As with federal taxes, you can choose between taking a standard deduction or making an itemized deduction. In California, the standard deduction is $3,657 for an individual and $7,274 for a married couple. Either this, or the amount from the itemized deductions, is subtracted from income to produce a taxable income figure. You can use itemized deductions for California taxes but not on federal taxes, and vice versa.
  
  

Variation

• The list of allowable deductions on California taxes is almost the same as that for federal taxes, including expenses such as interest payments, charitable contributions and medical costs. There are two differences. California does not allow deductions for taxes paid on new motor vehicles. And California only allows deductions for disaster losses as part of itemized deductions; in contrast, the federal tax system allows those who take the standard deduction to take the disaster deduction separately.