Unemployment benefits are fully taxed by the IRS. However, the recent American Rescue Plan makes the first $10,200 of unemployment benefits tax-free for 2020.
President Joe Biden signed the Plan into law as of March 11, 2021. At that time, millions of Americans had already filed their taxes without knowledge of this new tax break.
So, do you amend your tax return? No. IRS will automatically correct it for you.
How much can you save from this unemployment tax break?
- $2,244 if you are single and are in the 22% tax bracket.
- $4,488 if you are married and each spouse qualifies for the break.
* * *
Victor Santos Sy, MBA. CPA (Retired)
Victor Santos Sy graduated Cum Laude from UE with a BBA and from Indiana State University with an MBA. Vic worked with SyCip, Gorres, Velayo (SGV – Andersen Consulting) and Ernst & Young before establishing Sy Accountancy Corporation.
* * *
He retired after 50 years of defending taxpayers audited by the IRS, EDD, BOE and other governmental agencies. He published a book on “How to Avoid or Survive IRS Audits” that’s available at Amazon. Readers may email tax questions to email@example.com.