Does Selling on Etsy Affect Unemployment? 7 Facts

Losing your job is a difficult situation to be in, and one of the first things your mind scrambles for when you’re out of a job is alternative sources of income. Usually, the most common ideas that come to mind are unemployment insurance and side-hustles like taking on freelance jobs or selling on websites like Etsy and eBay. But can these side hustles affect your unemployment benefits?

Selling on Etsy can affect your unemployment benefits. Based on the CARES Act, you will still be eligible for some benefits. Depending on the requirements of your state’s unemployment benefits program, the additional income could stop or reduce your unemployment insurance payment.

Keep reading to find out facts about the CARES act, why you have to report the money you make from Etsy, and how to make the most of the money from your unemployment insurance and side hustle.

How Income Selling on Etsy Affects Your Unemployment Benefits

Selling on Etsy, or other platforms can cause you to lose your unemployment benefits because it is income that you would normally get from your job or benefits. The government doesn’t like it when you “double dip” and will take your benefits if they discover you’re making an income without reporting it. 

They also might make you pay back all the benefits you received before they discovered your extra income. 

If you also have a side gig, you can lose your benefits, as this is considered income. So when you start working on a side hustle, make sure you have your “ducks in a row” beforehand, so you don’t get in trouble later.

Let’s talk more about how selling on Etsy and other platforms can affect your unemployment benefits.

1. You Must Report Income From Selling on Etsy

The legal basis of giving unemployment benefits is to offer aid to eligible workers who have become unemployed of no fault of their own. 

These cash benefits are based on a percentage of your individual earnings over a period of time, so you will be required to submit income information before and after you start to receive your benefits.

Your income details should include all the taxable income you received in that period, which includes money from sources that are not exempted by law. These sources include, but are not limited to: 

  • Distributive shares in a partnership
  • Royalties
  • Fringe benefits
  • Business
  • Investment income
  • Independent contract
  • Freelance work

The list of taxable income sources is pretty exhaustive, but according to the IRS, taxable income clearly includes all the money you receive in payment for personal services. That’s not just wages and salaries, but also commissions and fees, like the money you make from selling on Etsy. 

Because the money you make from your Etsy shop classifies as taxable income, you must report it while filing for unemployment benefits.

2. Not Reporting Income When On Unemployment Is Fraud

You are obligated to report income from an alternative source like an Etsy shop to your state unemployment office. Money like this will be considered in filing for your unemployment benefits, so refusing to report it is a form of unemployment insurance fraud.

If you are found guilty of unemployment insurance fraud, you might have to pay back your benefits with added interest.

3. Unemployment Benefits Changed Because of the Cares Act

The Coronavirus Aid, Response and Economic Security (CARES) Act was passed by the United States Congress and signed into law on March 27, 2020, which had three major impacts:

  • Unemployment benefits became available to self-employed people who would normally not have qualified for unemployment insurance.
  • It provided additional weeks of unemployment benefits for up to 26 weeks after state benefits have expired, adding up to a maximum of 39 total weeks of benefits.
  • It offered supplemental aid, particularly during the COVID-19 pandemic, to augment other benefits.

The Pandemic Unemployment Benefits Compensation (PEUC) ended in September 2021, while the benefits under the Act that were received then have now changed.

4. Income From Selling on Etsy Will Affect Your Unemployment Benefits

If you make extra income from selling on Etsy, that money will be considered in determining your employment benefits. Depending on the rules of income insurance under your state law, the effect of that income on your unemployment insurance can be different. 

In some states, your additional earnings may not affect your benefits at all if it stays below a set maximum amount, which is calculated by state law regulations. 

But in the end, it’s usually based on the former income from your old job.

For other states, the payment from your benefits can be reduced based on your earnings from selling on Etsy. Again, the “formula” for various states differs, but the highest possible rate is a reduction of your shop earnings by the dollar from the benefits you should be paid.

This means that if you earn enough from selling on Etsy, and the deduction from your benefits is more than the payment itself, you may not get an unemployment payment at all.

5. A Side Gig May Reduce or Stop Your Unemployment Benefits

Getting into a side-hustle like selling on Etsy while receiving unemployment benefits has its pros and cons. Before making a decision, you should check the details of your state’s unemployment insurance program on the US Department of Labor’s Career One-Stop program. 

There, you can find out how earning additional income can affect your benefits, weigh the specific consequences for your state, and decide whether or not working freelance will be a smart decision.

If you decide not to get into a side gig because of its effect on your unemployment benefits, there are other alternatives you can explore with the aid of your state unemployment office.

6. You Can Appeal a Denial of Your Unemployment Benefits

If you are denied unemployment benefits because of income from a side-gig like selling on Etsy, you can appeal the decision

You must make an informed appeal, so you should go through the information on rules guiding unemployment benefits in your state. This will help you decide why you believe you should have gotten your benefits, which will form the basis for your formal appeal.

In some states, you can even file a second-level appeal soon after if the first appeal is denied.

7. You Can Effectively Manage Your Unemployment Benefits

Even without alternative income from a side gig, it’s possible to effectively manage the cash from your unemployment benefits. Methods like financial minimalism and other financial strategies have been proven to help people save as much as $10,000 per year, even from limited income.


With or without your unemployment benefits, there are many skills you can gain from the unemployment office that you can use to explore many new career paths. If you’re interested in becoming a counselor, for example, there are several ways you can leverage skills from the unemployment office to start that up!

About Hi' my name is Simon. I am the owner of Top Work Life. Together with a my team, I write content about income generating ideas, entreprenurship and growth as a person Read more about Simon & TopWorklife

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