Here’s how the $10,200 unemployment tax break works
by Greg Iacurci | Mar 16 2021
(cnbc.com) – Millions of Americans who collected unemployment benefits last year got a new tax break from the American Rescue Plan.
Here’s how it works.
$10,200 tax break
President Joe Biden signed a $1.9 trillion Covid relief bill Thursday that waives federal tax on up to $10,200 of unemployment benefits an individual received in 2020.
The break applies this tax-filing season, which started Feb. 12 and runs to April 15.
It only applies to federal income taxes. States may decide not to offer the tax break.
The IRS urged people who already filed their taxes not to file an amended return to claim the break. The agency will issue forthcoming guidance about what to do, the IRS said Friday.
About 40 million people received unemployment benefits last year, according to The Century Foundation. The average person got $14,000 in assistance.
Tax exclusion
Unemployment benefits are generally treated as income for tax purposes. The new tax break is an “exclusion” — workers exclude up to $10,200 in jobless benefits from their 2020 taxable income.
Individuals should receive a Form 1099-G showing their total unemployment compensation last year. The number is in Box 1 on the tax form.
For married couples, each spouse can exclude up to $10,200 of their benefits. That would reduce couples’ joint taxable income by a maximum $20,400.
Amounts over $10,200 for each individual are still taxable…
READ MORE:
www.cnbc.com/2021/03/16/heres-how-the-10200-unemployment-tax-break-works.html
h/t Dulcius