Did you lose your job in 2020 and collect unemployment?
You may qualify for a federal tax break.
The American Rescue Plan enacted on March 11, 2021 is allowing people to exclude from income up to $10,200 of unemployment compensation paid in 2020 if their modified adjusted gross income (AGI) is less than $150,000.
The break only applies to federal income taxes.
That means, people who qualify don't have to pay federal tax on unemployment compensation of up to $10,200. However, if their adjusted gross income exceeds $150,000 they cannot exclude any unemployment compensation.
The IRS adds if an individual is married, each spouse receiving unemployment compensation doesn't have to pay federal tax on unemployment compensation of up to $10,200. Amounts over $10,200 for each individual are still taxable.
The IRS said the exclusion should be reported separately from unemployment compensation.
People who have already filed their 2020 taxes prior to March 11 must wait for further instruction from the IRS on how to adjust their filing for the tax break.
Meantime, Pennsylvania Dept. of Labor and Industry reminds everyone the tax break is a federal, not a state program. So, anyone with questions on the break should contact the IRS.
Learn more about the break and if you qualify here.
