Here is what you need to know about the Tax Waiver for Unemployment Insurance Benefits
The new COVID relief that is currently waiting for the president’s signature to become a bill, includes a provision to waive taxes on the first $10,200 in unemployment income for those who made less than $75,000 in adjusted gross income in 2020. ($20,400 in the case of a joint return, but only $10,200 per spouse) in 2020 for households earning less than $150,000.
This provision will reduce up to $1,020 in tax liabilities from unemployment income. Keep in mind that this is just a partial tax forgiveness. If you received more than $10,200 in unemployment income the remaining will be still taxable. For example, if you had about $20,000 in unemployment benefits in 2020, and that was your only source of income for the year, the first $10,200 would be exempt from taxation, according to Richard Auxier.
The IRS will provide guidance as soon as they know better how the American Rescue Plan works. If you have not filed your taxes yet and you received unemployment benefits, we recommend you to hold until more information is available to take advantage of it. On the other hand, if you already filed your taxes it is possible that an amendment will be needed.