By Kerrin N.T. Liu
Generally, unemployment benefits are treated as income for tax purposes. However, a federal tax waiver of $10,200 for unemployment benefits received in 2020 was recently announced as part of President Joe Biden’s $1.9 trillion Covid relief bill. This tax break applies to the current filing season which runs until the postponed individual tax return deadline of May 17, 2021 (formerly April 15, 2021).
For married couples, each spouse can exclude up to $10,200 of their benefits, reducing couples’ joint taxable income by up to $20,400 maximum.
Any amounts exceeding $10,200 for each individual are still taxable.
Only US taxpayers who earned less than an adjusted gross income of $150,000 in 2020 are eligible for the $10,200 unemployment tax break. The $150,000 restriction applies regardless of filing status.
At the time of the writing of this article, the Internal Revenue Service has not issued guidance on how individuals may claim their $10,200 unemployment tax break. However, the Internal Revenue Service has asked those individuals who have already filed their return to refrain from filing amended returns until guidance regarding how this tax benefit can be claimed has been issued.
Kerrin N.T. Liu is a partner and attorney at Diosdi Ching & Liu, LLP. The tax attorneys at Diosdi Ching & Liu, LLP understand the rules and regulations governing FIRPTA and have represented clients who have been affected by FIRPTA. Kerrin Liu also represents clients in federal tax controversy and collection matters. Kerrin N.T. Liu may be reached at (415) 318-3990 or by email: kliu@sftaxcounsel.com.
This article is not legal or tax advice. If you are in need of legal or tax advice, you should immediately consult a licensed attorney