![]() ![]() So, if you received unemployment compensation last year, you might want to wait a little bit longer before using one of these software products to complete your 2020 return. ![]() It's also working with tax software companies to update their products so that users will be able to claim the exemption on their 2020 tax returns. If you haven't filed yet, the IRS has updated the Schedule 1 (Form 1040) instructions and provided an Unemployment Compensation Exclusion Worksheet for paper filers. ![]() How to handle the new tax break will also depend on whether or not you already filed your 2020 tax return. SEE MORE 10 Things You Must Know About Filing for Unemployment Benefitsīut there's still one big question surrounding this new tax exemption: How do you claim it? The IRS doesn't have an answer for everyone yet – but it's working on it. Normally, Uncle Sam fully taxes unemployment compensation (just like wages), so this is a big break for many people who lost their job last year and were facing a big – and possibly unexpected – federal tax bill on the tax returns their filing this year. If you're married, you and your spouse can each exclude up to $10,200 of unemployment compensation. Americans who received unemployment benefits last year can claim a special new tax break included in the $1.9 trillion American Rescue Plan Act recently signed by President Biden: Up to $10,200 of unemployment benefits received in 2020 is exempt from federal income tax for households with an adjusted gross income under $150,000. ![]()
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