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More Americans eligible for $10,200 unemployment tax break under new IRS rule
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More Americans are eligible to take advantage of a tax break on unemployment benefits under new guidance issued this week by the IRS.
The $1.9 trillion coronavirus stimulus plan that President Biden signed last week, known as the American Rescue Plan, waives federal income taxes on up to $10,200 in 2020 unemployment insurance benefits for individuals who earn less than $150,000 a year, potentially saving out-of-work Americans thousands of dollars from a surprise tax hit.
Although the IRS initially signaled that taxpayers had to count unemployment benefits as part of their 2020 income, the agency said Tuesday that workers can exclude the aid when calculating their modified adjusted gross income — meaning more individuals will meet the necessary income threshold to take advantage of the policy.
WHEN WILL THE EXTRA $300 IN UNEMPLOYMENT BENEFITS BEGIN?
For instance, an individual who earned $140,000 last year but collected $10,200 in jobless aid would have been disqualified from the tax break under the initial interpretation of the law. But that individual no longer has to pay taxes on the first $10,200 they received in unemployment aid under the newest guidance.