American Rescue Plan Act makes Some Unemployment Benefits Not Taxable

Under the ARPA, up to $10,200 of unemployment benefits received in 2020 can be tax free on a federal tax return for households with under $150,000 in adjusted gross income.  This is a hard line, there is no phase out.

For anyone thinking about amending their already filed return due to this change, the IRS Commissioner, Charles Rettig states “We believe that we will be able to automatically issue refunds associated with the $10,200”. This means amending returns won’t be necessary. Should this not come to fruition, we will contact any clients affected.

To date, several states have not conformed with this legislation- including New York.  In some situations, we may recommend delaying your filing until more information is available about how your state might treat this income, as it’s unclear if states will have the capacity to recalculate returns without filing an amendment.