The IRS says there is no need to take further action if you are one of the people affected by this change because the agency will automatically amend tax returns for those who are eligible. Although many states do not tax unemployment benefits regardless of the stimulus relief bill, some states do, so it is important to check to see what rules apply in your state of residence. For joint returns, the first 10,200 per spouse (i.e., 20,400 for two workers who are married filing jointly) is not included in gross income. Important to note: This exemption applies to federal income taxes, not state taxes. All filers need to have modified adjusted gross income below 150,000 to get the tax break. See: Terminating Employment Benefits Early Is Not Encouraging People to Find Workįind: 25 Tried-and-True Jobs That Will Last Through Any Recession That unemployment tax break doubles for married couples who file taxes jointly. Only the first $10,200 is exempt from tax - any dollar above that amount is subject to tax. The income threshold for being eligible is an adjusted gross income of less than $150,000 on your 2020 tax return. The American Rescue Plan made it so that up to $10,200 ($20,400 for married couples filing jointly) of unemployment benefit received in 2020 are tax exempt from federal income tax. Click here for general information from the Department. While it has already sent millions of checks, the IRS states that it will continue to do so through the end of the summer. The first 10,200 of unemployment benefits will be tax-free for people with incomes less than 150,000. It began issuing automatic tax refunds to eligible unemployment recipients in May. Many taxpayers were worried that they would miss out on new unemployment benefits if they had filed early, but as promised, the IRS has automatically adjusted taxpayers’ incomes from last year and taken into account how it would affect their eligibility for benefits after March 2020, when the bill became law. See: Hourly Wages Are Going Up But More Needs to Be Done to Bring Workers Backįind: Almost 3 Million Signatures on Petition for 4th Round of Stimulus Checks If you received unemployment benefits last year and filed your 2020 tax return early, you might not have received the unemployment benefits that are now available to you as a result of the coronavirus stimulus relief bill. The IRS is starting to send out unemployment benefits to those who filed their taxes last year before the American Rescue Plan was signed into law. A quirk in eligibility rules for a new unemployment tax break may lead some married couples to wonder whether they should file separate returns, even if they typically file jointly.
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