Do you qualify for tax free unemployment benefits? The American Rescue Plan Act signed into law by President Biden is designed, in part, to be beneficial to you if you spent some time on unemployment in 2020. According to Syracuse.com the plan makes a certain amount of unemployment benefits tax-free.

Do you qualify? If your household adjusted gross income is under $150,000 then you are off to a good start. This is the break down of the rest. If you were single, the first $10,200 in unemployment is tax free. If you were married, filing jointly the first $20,400 (up to $10,200 for each individual) is tax free. You will have to pay tax on anything over those amounts.

Q 105.7 logo
Get our free mobile app

In over 30 years in the workforce I found myself unemployed for a month and I have to admit it was confusing and stressful. Trying to figure out how to file, will the benefits be enough and just wishing you were working again. Then you realize you have to pay tax on these benefits. It can be overwhelming.

At the moment, this tax free status is for 2020 only. Anything you earned in 2021 is subject to tax. So, what do you have to do in order to enjoy the tax free status? Syracuse.com reports that, if you have not filed your 2020 tax return yet and you received unemployment benefits last year, you might want to hold off until the guidance is issued by the IRS.
If you have already filed your 2020 tax return, you’ll probably have to file an amended return (Form 1040-X) to claim the exemption. But again, you might want to wait until the IRS issues its guidelines. As of now, New York taxpayers will still have to pay state income taxes on their unemployment benefits.
So, in short, the answer is yes. A portion of 2020 unemployment benefits will be considered tax free for most unemployed Americans.

LOOK: 15 Discontinued McDonald's Menu Items

More From Q 105.7