It depends. If your modified adjusted gross income (AGI) is less than $150,000, the IRS will exclude from income up to $10,200 of unemployment compensation paid in 2020, which means you don’t have to pay tax on unemployment compensation of up to $10,200. If you are married, each spouse receiving unemployment compensation doesn’t have to pay tax on unemployment compensation of up to $10,200. Amounts over $10,200 for each individual are still taxable. If your modified AGI is $150,000 or more, you can’t exclude any unemployment compensation.
If you are qualified for the exclusion and a supplemental third stimulus payment due to a change in AGI, the IRS will likely send a stimulus payment to you once your adjustment is processed. If you do not receive the supplemental payment during 2021, you can claim the Recovery Rebate Credit on your 2021 tax return.
Questions and Answers about the Third Economic Impact Payment — Topic H: Reconciling on Your 2021 Ta...
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