10 200 unemployment tax break 20221/1/2024 ![]() This could result in a tax bill for some, depending on how much total income they had in 2020.įor example, if an individual had about $20,000 in unemployment benefits in 2020, and that was their only source of income for the year, the first $10,200 would be exempt from federal taxation, according to Richard Auxier, senior policy associate in the Urban-Brookings Tax Policy Center. Of course, those who had more than $10,200 in unemployment income in 2020 will still be taxed on the remainder. This could amount to even more for people in higher tax brackets, she said. On average, the provision in the latest stimulus bill will reduce up to $1,020 in tax liabilities, either increasing people's refunds or lowering the amount that they owe, according to Pancotti. In addition, some states did not offer workers receiving unemployment benefits through CARES Act programs the option to withhold a portion for taxes. People receiving unemployment can opt to have 10% of benefits withheld to cover the federal tax liability, but fewer than 40% of recipients appear to have done so in 2020, according to the paper. Those benefits - including the now-expired additional weekly $600 of Federal Pandemic Unemployment Compensation and the extra $300 weekly through the Lost Wages Assistance program - are considered taxable income. "Partial tax forgiveness will ensure that millions of Americans don't have to mail their relief checks back to the IRS, and can instead put food on the table, refill prescriptions and pay the rent," said Pancotti, who is a policy director at Employ America. ![]() More from Invest in You: Lost jobs, no child care: A year into the pandemic, women are not OK The IRS got 35 million tax returns in one week as Americans race to file Smallest businesses getting extra PPP help. ![]() In 2020, roughly 40 million Americans collected unemployment insurance benefits, according to a February research paper written by Brian Galle and Elizabeth Pancotti for The Century Foundation. Making the first $10,200 of unemployment insurance income tax free is aimed at keeping families from being hit with a surprise bill at a difficult time for many. "If you hit $150,000, all of it becomes taxable, there's not even a phase out," said Rhonda Collins, director of tax content and government relations with the National Association of Tax Professionals. Personal Loans for 670 Credit Score or Lower Personal Loans for 580 Credit Score or Lower Best Debt Consolidation Loans for Bad Credit ![]()
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