New Exclusion of up to $10,200 of Unemployment Compensation
If your modified adjusted gross income (AGI) is less than $150,000,
the American Rescue Plan enacted on March 11, 2021, excludes from
income up to $10,200 of unemployment compensation paid in 2020,
which means you donít have to pay tax on unemployment compensation
of up to $10,200. If you are married, each spouse receiving
unemployment compensation doesnít have to pay tax on unemployment
compensation of up to $10,200. Amounts over $10,200 for each
individual are still taxable. If your modified AGI is $150,000 or
more, you canít exclude any unemployment compensation.
The exclusion should be reported separately from your unemployment
compensation. See the updated instructions and the Unemployment
Compensation Exclusion Worksheet to figure your exclusion and the
amount to enter on Schedule 1, lines 7 and 8.
The instructions for Schedule 1 (Form 1040), line 7, Unemployment
Compensation, are updated to read as follows.
You should receive a Form 1099-G showing in box 1 the total
unemployment compensation paid to you in 2020. Report this amount on
the amount reported in box 1 of your Form(s) 1099-G is incorrect,
report on line 7 only the actual amount of unemployment compensation
paid to you in 2020.
your modified adjusted income (AGI) is less than $150,000, the
American Rescue Plan enacted on March 11, 2021 excludes from income
up to $10,200 of unemployment compensation paid to you in 2020. For
married taxpayers, you and your spouse can each exclude up to
$10,200 of unemployment compensation. For example, if you were paid
$20,000 of unemployment compensation and your spouse was paid
$5,000, report $25,000 on line 7 and report $15,200 on line 8 as a
negative amount (in parentheses). The $15,200 excluded from income
is $10,200 for you and all of the $5,000 paid to your spouse. If
your modified AGI is $150,000 or more, you canít exclude any
unemployment compensation. Use the Unemployment Compensation
Exclusion Worksheet to figure your modified AGI and the amount you
If you made contributions to a governmental unemployment
compensation program or to a governmental paid family leave program
and you aren't itemizing deductions, reduce the amount you report on
line 7 by those contributions. If you are itemizing deductions, see
the instructions on Form 1099-G.
state may issue separate Forms 1099-G for unemployment compensation
received from the state and the additional $600 a week federal
unemployment compensation related to coronavirus relief. Include all
unemployment compensation received on line 7.
If you received an overpayment of unemployment compensation in 2020
and you repaid any of it in 2020, subtract the amount you repaid
from the total amount you received. Enter the result on line 7. Also
enter ďRepaidĒ and the amount you repaid on the dotted line next to
line 7. If, in 2020, you repaid more than $3,000 of unemployment
compensation that you included in gross income in an earlier year,
see Repayments in Pub. 525
for details on how to report the payment.
Tip. If you
received unemployment compensation in 2020, your state may issue an
electronic Form 1099-G instead of it being mailed to you. Check your
state's unemployment compensation website for more information.
The IRS worksheet to determine if you are eligible can be found
information provided courtesy of
the Internal Revenue Service www.irs.gov
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