Taxpayers got a surprising tax break relating to unemployment benefits received in 2020 only, as part of the American Rescue Plan. Many taxpayers were no longer required to pay taxes on up to $10,200 in unemployment benefits received in 2020. The exclusion was up to $10,200 of jobless benefits for each spouse for married couples, but not everyone was covered by the temporary break.
The special provision to waive taxes on some unemployment income applied only to those who made less than $150,000 in adjusted gross income in 2020.
If you had taxes withheld on jobless benefits, the federal taxes are withheld at a 10% rate. Many people, when they lose a job, often do not have taxes withheld and could owe taxes when they file their 2021 income tax returns. But some key tax credits can come into play, so not everyone will necessarily owe money.
How we can help
The deadline to file a federal income tax return is April 18 in 2022 but it’s never too early to get ahead.
If you need help or advice with your finances, contact us today for a free initial consultation. TaxAssist offers an expert professional advisory service. Inquire online here to book your free, no obligation consultation.
Date published Feb 14, 2022 | Last updated Jul 8, 2022This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.
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