Can I Claim the $10,200 Unemployment Tax Break in the Biden Stimulus Bill in 2020 or in 2021? Updated with IRS Guidance

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This article was last updated on March 24

Under the Biden Stimulus (ARP) package which funded another round of unemployment benefit extensions, there was a late provision added that provided a tax break on unemployment insurance (UI) benefits. This was added as a compromise to appease factions of the Democratic party who wanted more support for those receiving unemployment benefits coverage while keeping the incentive to return to work.

The amendment in the final stimulus bill will make the first $10,200 in unemployment benefits/compensation received in 2020 non-taxable (i.e. tax free). For married couples, this amount would be $20,400. This will go a long way to prevent the surprise unemployment income tax hits many jobless American households have seen or are potentially facing in 2020 when filing their tax return. 

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This unemployment income tax break however will apply to households with total incomes under $150,000 (Adjusted Gross Income, AGI) in 2020. For married couples, the $150,000 limit still applies as it is a household maximum and not a straight filing status doubling like many other income level based credits. Also per recent IRS guidance, this is a hard limit and if your household income is $150,000 or more, irrespective of filing status, you can’t take this tax break on any unemployment income earned in 2020.

Note that this tax break only applies for your 2020 income – used for your tax returns filed in 2021. At this stage no provisions in place for it to apply on your 2021 income (for 2022 filings). But it is highly likely Congress will extend this tax break given elevated levels of pandemic induced unemployment.

On average this tax break could reduce a tax filers liability or increase the refund received by up to $1,020 (or $2,040 for couples). Those who had more than $10,200 in unemployment income in 2020, and there are many states where jobless workers would have received more than this, will still be on the hook for unemployment related taxes above this level.

A simple example of how the tax break would work

John had $21,000 in unemployment benefits in 2020 via the PEUC and FPUC programs. He earned another $30,100 from his job before he was laid off. In this scenario, John’s total 2020 income would be below the $150,000 limit to get the tax break so the first $10,200 of unemployment income would be exempt from taxation. His taxable income (AGI) would essentially be $51,200 – $10,200 = $41,000. Based on this he would likely be able to take other low income tax credits and the standard deduction ($12,400 in 2020) which may mean John gets a pretty decent refund to boot if he paid withholding taxes on his earned income.

What if I already filed my taxes for 2020 and paid taxes on Unemployment?

The IRS have now issued guidance around this. Basically they are saying that for folks who have filed their 2020 return they do not file an amended return (as was originally assumed). The IRS will automatically make the adjustment once they update their systems to review eligibility and process this tax break. If you are eligible you will get an additional refund via direct deposit or in the mail. Tax packages like Turbo Tax and Tax act have updated their software to account for this tax break as well.

What about my form 1099-G?

The IRS receives form 1099-G (reporting unemployment benefit payments) electronically from the individual states’ unemployment agencies. If a tax return or amended tax return is filed reflecting a different amount from form 1099 G, the IRS matching engine will generate a letter to the tax holder showing the discrepancies along with an tax bill for monies due.

The IRS guidance has confirmed that this unemployment tax exclusion should be reported separately from your unemployment compensation. 

Does the $10,200 lower your taxable income (AGI)?

Yes. The tax break would act like a credit and reduce your overall taxable income. See example above. It would lower your 2020 tax liability or result in a refund if you can claim the standard deduction and other refundable credits (like the expanded CTC an EITC). See the above point on what to do if you have already filed your tax return.

Should I wait to file my taxes if I can claim this credit?

No. You can claim this now if you have not filed your return. Larger tax preparation companies (like Turbo Tax) have implemented the programming to claim this credit. If you have already filed your return the IRS will review details and make an adjustment to pay back any tax credits per the above FAQ.

How does the Tax Break work for Married Couples?

For married couples filing jointly with AGI below $150k where BOTH received unemployment income, each can deduct the $10,200 for a total of $20,400 against their 2020 taxes. If you file Form 1040-NR (for non-residents, trusts and deceased individuals), you can’t exclude any unemployment compensation for your spouse.

Feel free to leave a comment or see the questions below for answers to some reader questions.

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99 thoughts on “Can I Claim the $10,200 Unemployment Tax Break in the Biden Stimulus Bill in 2020 or in 2021? Updated with IRS Guidance

  1. Wages 97,624 plus I have to use some of my 401K which gave me a gross wage of 141,406K

    My spouse unemployment was a total of $15,505K, which brings my AGI to $156,602 (including some interest made)
    First of all can i write off the whole $15,505K since I am filing jointly or just the$10,200 since my wife only received the unemployment
    In either scenario, according what I read, this amount is to be subtracted from the AGI, which will put me under 150K, and I will also be eligible for a stimulus payout?

    Am I correct on this?
    Thoughts?

  2. If state income tax (ga) is based upon federal, does the ui $10k credit mean I will need to amend my ga return?

    1. In a word- yes. It may not have been the legislative intent but that is how the law was written. You can file married separately to get under the $150,000. The IRS worksheet does not tie the $150K to filing status. It is $150 per return/filer. I pointed this out to the Wall St. Journal reporter who has been writing about this and he changed the language in his article from $150,000 per household to $150,000 per return filer.

  3. Will this affect eligibility for healthcare subsidies in 2020 in states that didn’t expand medicaid? If unemployment was the only thing that put you over the income threshold, will you now be retroactively ineligible for the healthcare subsidy?

    1. I am wondering the same thing, too. I don’t have the money to pay back the subsidies, so I don’t want to take the tax break unless “they” don’t make me pay back the subsidies. (I have already filed my taxes and paid my taxes due.) If they give us the tax break without us doing anything like they’re talking about, that makes me very nervous. That will screw a lot of us and be totally unfair to us if they make us pay it back when we claimed the UI benefits legally as taxable income in order to get the subsidies. If you hear anything, please comment on this site. I’ve googled so many areas to find out and no one seems to know the answer to this.

  4. What is the maximum income allowed for the unemployment tax break for an individual filing married/separate. The law, as worded, and the IRS worksheet, on the IRS website, apply the same $150,000 regardless of filing status. This would appear to contract your wording of $150,000 “per household” at least in the case of married filing separate taxpayers each of whom earn less than $150K.

    1. Correct. It’s 150000 regardless of status. So single or married household, the limit is the same. But if both adults in household are unemployed they can both get the $10,200

      1. What about this situation? Both in household were technically unemployed, but I was the only one who qualified for unemployment. My wife had essentially no earned income. We live in a community property state and all income is “community” income. I received unemployment income of $23,000, plus other income amounts totaling well under $150K. Do we get to exempt $20,400 in unemployment income? If not, would we avoid this “marriage penalty” by filing separate returns?

      2. But you didn’t correct the wording in your article. You imply MFS must look at their household income and not their 1/2 of that income as per the AGI on a MFS return.

  5. We are filing a joint return (I think). My wife had essentially no earned income. We live in a community property state and all income is “community” income. I received unemployment income of $23,000, plus other income amounts totaling well under $150K. Do we get to exempt $20,400 in unemployment income? If not, would we avoid this “marriage penalty” by filing separate returns?

    1. I have this exact question. Guidance is sparse-to-nonexistent, most are just blogs and reblogs of the same info. Seems to be too large a loophole to remain, but with the rapidfire legislation, “mistakes” like this are common.
      Would really love followup from anyone.

      1. Its only a tax break on unemployment income. So your wife and you would both have to had unemployment income in 2020 to get the tax break. Its the first 10,200 on UI compensation – so the combined limit is only applicabile if you both got this. If only one spouse gets UI income then $10,200 is all they can claim, irrespective of married, single or HoH status.

  6. I have tried to answer several questions on here where I know the answer. Just an FYI, it will not allow me to answer questions if the question has already been answered. So the best thing to do is to search the questions to see if your question has already been answered. Thanks

  7. My husband received $6000. in unemployment and I received $16,000. in unemployment. Can we deduct the $20,400. from our taxes since combined we have $22,000. in unemployment. Or are we only allowed to deduct $10,200. for me and $6000. for my husband based on who received the unemployment.

  8. My husband and i had our unemployment taxed and we already filed.we used tax act. Is it going to be easy to amend the 20,400 now credit. Will there be a section to put down the amount? Not sure how to do this.

    1. There have been no instructions given by the IRS on how to handle this. The best option is to wait until the IRS gives instructions on how to handle it, so it can be done correctly.

  9. will the exclusion of 10,200 unemployment benefits from income also lower or reduce the amount of taxable social security benefits one must pay as an unintended consequence?

    1. It might.
      Social Security gets taxed if half of your benefits plus other income is greater than a threshold value. 25K for single, I think 34K for married.
      If your ui benefits pushed you over the threshold, then recompute with the lower ui amount.

  10. Hi!

    Me and husband made $151,500 together in 2020, with $16,000 of that being unemployment. I see the cut off is $150,000- will the $10,200 credit apply and lower our AGI to $141,300? Then we could be eligible OR because in total counting unemployment we are over the $150k threshold we do not get the credit?

    Thanks!!

  11. I have not filed my taxes as of yet. I received my 1099-G from State of FL.
    Do I simply subtract $10,200 from total myself, since we did earn under $150,000 and it has been signed into law?
    Or do I have to wait for something else?
    Thanks in advance

    1. Also wondering the same thing here. I plugged everything into turbo tax earlier this year but did not hit submit.

      My UE was 22,000 and I was set to owe $1200 as I paid nothing in taxes into UE. Went in this morning and subtracted the amount and will now only owe $49, STOKED. But again, have not clicked submit as I am not sure if this is actually the way to go about claiming this.

      1. There have been no instructions given by the IRS on how to handle this. The best option is to wait until the IRS gives instructions on how to handle it, so it can be done correctly.

    2. No, you cannot file your return and simply subtract the amount. The information that is on the 1099-G has been reported to the IRS and any discrepancy in the amount on your return and the amount reported would cause a delay in processing your return. Since you have not filed your return yet, if you can wait until the IRS gives instructions on how to process this that would be the best scenario. If you cannot wait, then you will need to get instructions from the IRS on how to file an amended return later down the road.

    3. I have the same basic question I got $18,695.00 in unemployment. Should I enter $18,695.00 or $8,495.00?

  12. Our 2019 returns do not make us eligible for the stimulus but our 2020 returns do. We filed today. Will we miss out on receiving the stimulus until our 2021 taxes?? Or will the IRS process our stimulus after they process our taxes?

    1. If your 2020 return is not processed by the time your 3rd round stimulus is sent, the IRS should be sending a payment before July 15 (assuming the tax deadline is not moved from Apr 15).

    2. We filed our 2019 by mail and owed money which I finally paid and it has been cashed by the IRS. I didn’t get the 2nd stimulus check in 2020 so I filed my 2020 by mail again and took the $1200 credit. How an I check on the status of 2019. I also received over $40,000 of unemployment so I am eligible for the $10,200 credit. Can I claim this online or do I have to do paper?
      Also can I refile on line even though I already mailed my 2020 in?

      1. We filed our 2019 by mail and owed money. I sent in some with the return and paid the balance in February 2021. We never received the 2nd stimulus so I took the credit on 2020 return. I also filed the 2020 return by mail. How can I tell if the 2019 has been processed. I haven’t received the $2800 ( married filing jointly less than 150,000) When I look at my account on the IRS website it shows 2018 as the most recent filing. What can I do?

  13. Can married people file jointly so that we are able to benefit from the tax exemption on unemployment? I made about 5100 in unemployment and my husband did not. We are over the $150k threshold together but I would be under 80K if I filed separately.

    I am not sure if this is even possible.

  14. I received $13k in unemployment for 2020. Combined with my husband’s income, the UC pushes us over $150k. Am I correct in say I cannot take the $10200 credit? Thank you.

    1. Correct. The AGI for purposes of calculating the 150k limit includes all UI. You would not be eligible.

      1. Can you advise your source for this information about the qualification calculation? I have not been able to find any guidance or updates from the IRS about this. Thank you!

  15. How does this work for other credits that are refundable?

    Can this lower your AGI to a point where you may be eligible for the Earned Income Credit or other needs based credits? Or does it just alleviate the tax burden on that $10,200, but still counts as income?

    Also, if you claim this in tax year 2021 would that impact the AGI for year 2021 or does it base it off year 2020?

    Thanks

  16. My unemployment with deductions brought our AGI over the 150,000 but less that 160,000. With the 10,200 not being taxable would that mean we would get the full Stimulas instead of portion of it? Also we filed 2020 I checked the status of the refund and it has been approved/ not processed. Will I have to file amended return? 2019 was less than 150k. If it doesnt process by the time checks are sent out will they use the 2019.

    1. No idea what the cut off date will be for using 2020 tax return. However, since your AGI is over 150k, you do not get the tax free 10,200.

  17. I have not worked since March 2020 I didnt file for pua till Nov 2020 On jan 11 2021 I started receiving checks with no isssues I have put everything required in my secure file and still waiting on all back pay for 2020 Now it looks as I wont qualify for the tax break for 2020 even though they should have been 2020 payments Ive questioned time on back pay since evrything has been submitted and its been 4 months I just keep getting told they will ge t to my file So any idea when ? Also am i screwed on the 2020 tax break Thanks for any info

  18. My AGI is 154000.00 but I do have 10200 in unemployment. Would my new AGI be 143800 which would make me qualify or will my 154000.00 starting point disqualify me from claiming?

    1. Does the $10,200 lower your taxable income (AGI)?
      Yes. The tax break would act like a credit and reduce your overall taxable income. See example above. It would lower your 2020 tax liability or result in a refund if you can claim the standard deduction and other refundable credits (like the expanded CTC an EITC). See the above point on what to do if you have already filed your tax return.

  19. I made 81000 in 2020. this is counting my 10000 i made in unemployment. Can i get my 1400 stimulus money with the 10200 credit ?

    1. Most likely yes. If your 2019 return is less than $80k, you can get some of the $1400. Once you file 2020 when the forms are updated, you’ll get the difference if you didn’t get $1400 based on the 2019 return.

  20. My Question is in regards to my obama care we purchased. As we had more money than anticipated, we were hit with the 2700 fine for underestimating income. Will this 10,200 credit also give us a rebate on that amount? IE we would have been under the max fine with 10k taken out.

    1. Several thoughts:
      1) first, as I understand it the American Relief Act eliminates these penalties for 2020. You may wish to research yourself.
      2) have you filed your 2020 taxes yet? If not, and you or your spouse did not belong to an employer sponsored 401k program in 2020, look to make a contribution to a traditional IRA (assuming you’ve not yet maxed out these contributions) to lower your AGI.

      Again, as I understand it #2 may not be necessary in light of #1. This would enable you to maintain greater liquid savings. However, if my understanding is not correct regarding #1, and you’re eligible for #2, this will enable you to make payments to your retirement rather than pay a penalty for 2020.

      The timing of this in Congress is poor. I had completed my 2020 return quickly because 1) I was expecting a refund and knew the IRS was going to be behind and 2) I wished to be potentially eligible for a stimulus. Consequently, I missed the $10,200 credit, removed $4500 from immediate savings to a traditional IRA to lower my AGI to decrease penalties AND I didn’t exclude the payment for marketplace credits from my return.

      As a result, I’ll likely need to file an amended return when the IRS is able to sort through the dust. However, this all comes down to Congress making this a midnight hour deal. Had they taken action sooner, many of the above referenced challenges could have been averted.

      1. this was not my question. I’m trying to find out if the IRS has processed my 2019 taxes that were mailed last July. We owed $956. Paid $200 with return and filed an Installment request. I haven’t heard from the IRS so we paid $756 in Feb. We never received the 2nd stimulus so we took a credit of $1200 on 2020 return, which was just mailed. I was also on unemployment for the entire year 2020 so I’m waiting for info on what to do for the $10200.
        Are we going to get this 3rd stimulus – Can you check on this. Do you need SSN

  21. I have not worked dice March 2030 I stated receive reg pua in jan 2031 I’ve yet to receive any back pay from March 2020 thru 11 2020 now it’s March 2021 I’ve had all forms submitted on my security page Now appears I’m still waiting on investigate my claim for job attachment and proof is in my file Now since the delay I’ll have to pay taxes on all of it includes the amount that should have been paid in 2020 How do I get my claim moving forward since it’s been 4 months ??

    1. I had this same problem. I finally received all of my PUA payments from March 16th, 2020 through December 31, 2020 on February 16th 2021. And yes I believe I will get screwed out of the $10,200 tax break as well. But to answer your question what it took for me after 8 months of calling unemployment and online chats got me nowhere, was I contacted my state senator and my Governor’s office which both had on their individual webpages a form I was able to fill out requesting help to get my payments. After I finally learned I could do this it was only about a week later and I actually received all of my back pay, and am receiving my payments on time every 2 weeks now. So I would suggest going that route as long as you have turned everything in to your UIA office that is required to prove your employment status prior to filing for unemployment. Good luck

  22. What form do I use on my federal taxes, as I have filed our 2020 taxes and my wife paid taxes on $12,600! So I want to file an amendment for the $10,200?

    1. You will probably have to file a 1040x to amend once the IRS has updated the forms to account for the $10,200 exclusion unless the IRS offers some other way such as them automatically recalculating the taxes.

  23. For married couples filing jointly with AGI below $150k that BOTH received unemployment income, can they both deduct $10,200 for a total of $20,400 is is it just $10,200 per return.

  24. Do you know how this will apply to college students that collected PUA and are claimed as dependents on a parent’s tax return?

  25. Illinois
    IDES
    Does anyone know if there is a PUA Processing delay for the week endind 03/06/2021? I still have a balance on PUA.
    I usually get the Payment Processed on Monday and the Payment on Wednesday.

  26. I need to file my 2020 tax to qualify for the $1400 stimulus check. I worked very little in 2020 and received Unemployment. If I file now, I will owe federal and state taxes. Once the 10,200 is factored in I will get a refund on Federal taxes and owe less on state taxes. I will use the stimulus to pay for the taxes. I want to file my taxes so I get the stimulus check and won’t need to pay federal taxes. Can I file taxes and not pay for them so I can at least qualify for the stimulus. Then adjust or amend my taxes so I won’t need to pay the federal tax ?

    1. If you file with turbo tax, there is an option to send in your return and hold off on paying any monies owed until April 15th.

    2. Even if you file now, it is questionable whether your 2020 return will be used to get the stimulus check now.

  27. The IRS has a vast and complicated computer program that would need to be overhauled and have code written to reflect the tax credit for the first $10,200 of unemplyment.

    Please note the IRS recieves form 1099 G electronically from the individual states. If a tax return or amended tax return is filed reflecting a different amount from form 1099 G, the IRS matching engine will generate a letter to the tax holder showing the discrpancies along with an tax bill for monies due.

    Best practices are to wait for the bill to be passed and the IRS to give guidance on how it should be accounted for.

    You and all others who are speculating are creating and reaking havock for tax professionals.

    1. Thanks Michael. I see your point and have added a disclaimer to reflect this and minimize confusion

    2. How will we know when the IRS gives the guidance on how it should be accounted for?

  28. , you mention that you can file for 2021 if you didnt take the credit and already filed, from what i read it specifically states it can only be used for 2020 tax year. was there a change to what was in the senate changes?

    1. There is no change: a Senate amendment to the bill would make the first $10,200 of jobless benefits tax free for taxpayers with incomes of $150,000 or less for the 2020 tax year. There is nothing about year 2021.

      1. i didnt see it either which is why i was questioning why in the post it says or 2021

      2. from this section above the last paragraph states can do in 2021, thats what the question arose from

        Can I Claim the $10,200 Unemployment Tax Break in the Biden Stimulus Bill in 2020 or in 2021?
        by Andy31

        What if I already filed my taxes for 2020 and paid taxes on Unemployment. Can I use this exemption for my next 2021 taxes or did I just get screwed?
        I got this question from a reader and the answer is you are not screwed and in fact have a couple of options. You can eventually file an amended tax form 1040-X for 2020 to get the money this year; but wait till the IRS processes your currently filed one if you have already submitted it. The IRS now accepts the 1040-X amended tax return form electronically and you can use tax software packages like Turbo Tax or e-File to do this.

        Or you can claim this tax break/credit in 2021 via your standard tax return filing in 2022. Either option works depending on when you need the money and if you want to (or not) take the time to file the amended tax

  29. is the $150,000 household income limit for this the same for filing as single filer or is it a lower limit?

    1. what is the threshold for single taxpayers for unemployment exemption?

      1. 150,000 for the household. Single or married (pending final IRS guidance)

  30. In NY unemployment s taxable. Do you think the 10200 will be exempt from NY taxes. How will we find out

  31. Will the 10200 exclusion actually reduce your AGI ? That will help in regards to the stimulus payment credits if people didn’t get them last year and now are in range of qualifying.

    1. Yes. that is apparently how it will work. So could reduce tax liability by $1020 or increase the size of your refund.

  32. I already filed my taxes for 2020, but it is in the stage of being process. Will I have to file an amended return?

      1. I dont see how you could claim it in 2021. What provision in the law would allow for this? This isnt like stimulus money. The tax free UI is for 2020 only.

  33. If I need the unemployment benefits as taxable income to qualify for Obamacare, do I have to claim the $10,200 exemption? If I have to claim it, I have stay on MediCal, which I don’t want to do. I’d rather pay the taxes. Does anyone know?

  34. If I file after April 15, during the extension period will I automatically get the 10.2 tax benefit? Or do I have to insure my tax man applies it?

    1. Your tax preparer should be aware of it & tax systems should be updated to reflect it. That being said in conversation when handing over documents you can confirm it will be captured in the return. You as the tax payer are ultimately responsible for your tax return filing.

  35. How will the phase out work for “households” that make over $150,000? For example, if my husband made $140,000, and I had $20,000 in unemployment, will we get any tax break on that? Or, since our “total” is now over 150k, is the unemployment 100% taxable? I’d imagine there would have to be some sort of phase out, otherwise if you totaled $150,001 AGI and had absolutely no other way to reduce that (already maxed everything you could), then you’d be out of luck!

    1. There was a similar tax exemption in 2006 which did lower the AGI but, that I can see, there was not a limit on income. My question would be what line on the 1040 is used to determine who gets a the exemption. Does it lower the AGI where some would then qualify for stimulus. For example, AGI is $157,000, which includes $25,000 unemployment. You owe $1,000 in federal taxes. If the $10,200 lowers your AGI, you qualify for stimulus any may not owe the tax. Big difference.

      1. The text of the bill is very short, and clear. The AGI including *all* UI needs to be under 150k to get the 10,200 UI exemption. If that number is over 150k, no exemption, and no phaseout. So yes, there are two benefits that go away (although the stimulus phases out) for a married couple at 150k.

  36. Hello, I actually did not work in 2020. However I qualified for PUA benefits as I was scheduled to start my seasonal work in late March which was cancelled. I have not filed my taxes yet, I did have them deducted throughout. My question is will this tax $10,200 relief be applied after my standard deduction as a single tax payer? If not this not not help me or others of lower incomes.

  37. Andy –
    I haven’t filed my Federal or State taxes yet. Now with the first $10,200 not being taxable, will the Federal (I assume not the State) come up with a form to attach to your 1040, or will the IRS figure it out and owe me for the difference? Quite inconvenient since tax day is 4/15 and I like to get it out of the way before then.

  38. Question from Brad: So if we have already filed. Do we now have to file an amended return because they decided to excluded $10,200 from the taxes? Or are they going to adjust the filed first return to compensate for the $10,200? Nothing like changing the rules after we have sent in the return for 2020.

    Answer: While the IRS has yet to issue formal guidance, it is likely you will have to e-file an Amended return if you have already received your refund or your return has been processed. Or else you can claim this in your 2021 return filed next year. A pain for early filers. But don’t forget this was introduced by Congress as a political compromise. The IRS did not set this exemption.

    1. And TurboTax says the form 1040X to amend your return won’t be available until 3-25-2021. If you are using TurboTax, you can sign up to receive email notification when it’s available.

  39. I assume this is in regards to Federal tax…..how is it handled for state taxes on the first $10.2k benefits received in 2020

    1. Good question. Yes, this is for federal taxes. But several state don’t tax UI and up to states to exempt on their end (but I don’t think it will happen given they need the revenue).

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