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Amended return may be needed to get full refund on $10,200 unemployment tax break, IRS says


$10,200 unemployment tax break

The American Rescue Plan waived federal tax on up to $10,200 of unemployment benefits, per person, received in 2020.

However, President Joe Biden signed the $1.9 trillion Covid relief measure on March 11 — about a month into tax season.

The tax break may make some households eligible for tax breaks that they hadn’t qualified for based on their income when they’d originally filed their taxes.

That’s because the tax break technically excludes benefits from a taxpayer’s income, thereby reducing the income on which they pay tax.

That income reduction may make them eligible for income-dependent tax breaks like the Earned Income Tax Credit, according to the IRS.

“It’s not a judgment call,” Henry Grzes, lead manager with the tax practice and ethics team at the American Institute of Certified Public Accountants, said. “It’s a pure exercise in arithmetic.”

Amended tax return

About 40 million people collected unemployment benefits in 2020, according to the Century Foundation. The average person received $14,000.

The unemployment tax cut is not available to taxpayers whose modified adjusted gross income is $150,000 or more. That income ceiling is the same regardless of filing status (like single or married) but the calculation excludes jobless benefits.

Earned income tax credit



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