Unemployment Income Tax Exclusion for 2020

Hi Cesar de la Cerda here, founder of Galleria Tax.

Welcome to my website & I hope that you gain some knowledge that helps improve your financial situation!

With this post, I would like to share information about the recent Unemployment Income Tax Exclusion for 2020.

If you find the information insightful, please like us, subscribe and share.

So let's jump right in!

With the passing of ARPA or the American Recovery Plan Act on March 11, 2021, there was the addition of a Tax Exclusion for Unemployment Income Benefits.

What does this mean to many of you? Well that depends on a number of factors.

First the Tax Exclusion is for $10,200 of unemployment income benefits received. If you are married, you and your spouse could potentially reduce your taxable income by the combined total not exceeding the total exclusion for both.

To qualify for the exclusion, there are a few caveats, such as your Modified Adjusted Gross Income has to be less than $150,000.

There could be lot’s of thoughts racing through your head!

I have already filed, does that mean I miss out on this because of filing too early or now have to file an amendment! Well the answer is no, because the IRS is working on a fix for those that have already filed. So have some patience for the IRS to resolve the specifics to your situation.

If you haven’t filed, because many of the tax filing software companies have or are working on updates to help facilitate the recent update. So don’t despair because the IRS also extended the filing deadline to May 17, 2021.

So besides the fact that tax exclusion exists and it could be a hot mess to figure out the calculations for what a refund would look like? What could this mean to you?

Well that depends.

1- First, you could potentially pay less taxes, which could result in a higher return or refund to you. YAY!!!!

Well that isn’t all, yes there is more

2- You could also end up getting additional tax breaks, because of the income exclusion, your adjusted gross income will get reduced and allow for other tax breaks due to either the AGI eligibility cut off or AGI eligibility phase out. This in effect could help some qualify for additional tax breaks, such as the earned income tax credit, the child tax credit, retirement saver’s credit, American Opportunity credit, Lifetime Learning credit or student loan interest deduction. So there could be some potential benefits for many.

Lastly, a reduced AGI could also mean a larger 3rd stimulus income payment.

So as the expression says “The check is in the mail”, but don’t spend it yet!

So as updates come around by the IRS, stay tuned in to me for updates.

If you like the content, please like and subscribe, which will also help ensure you get updates as I post.

So in closing don’t forget, “Put your money to work all day every day!”