I have a client who was on unemployment for a portion of the tax year and then decided to pull money out of their 401k and maxed out their credit cards to launch their business.  They didn't make alot of money in their business but had alot of expenses.  When I started filling out their schedule C to include all of their business deductions, the amount they owed in terms of federal taxes didn't go lower than a certain $ amount no matter what the deductions totaled.  Is there a cap on how much you can deduct if you collect unemployment?  Or is there something else that I'm missing? Thanks.