Many deductions and credits are based on your taxable income. The $10,200 unemployment tax break is actually an income exclusion, meaning it lowers the amount of income you’re taxed on.
If you filed your return before it went into effect, your credits and deductions were based on your total taxable income without the exclusion. Now that your taxable income is lower, you might be eligible for some income-based deductions and credits that weren’t available to you before.
Review the most common tax breaks below to see if there’s anything you think you might be eligible for with this exclusion.
- Find your 2020 AGI. If it's $150,000 or higher, then you don't qualify for the unemployment tax break.
- Look at your Schedule 1, line 8. It's in your tax return PDF right after your Form1040.
- If it says UCE and a negative dollar amount, your unemployment compensation has already been excluded from your income so you don't need to amend to get new credits or deductions.
- If it doesn't say UCE, subtract the number on Schedule 1, line 7 (or $10,200, whichever is less) from your AGI. If you're Married Filing Jointly and you both received unemployment income, subtract the amount of unemployment each person received (or $10,200 each, whichever is less).
- Use that new AGI number to compare. If it qualifies you for any of the deductions or credits listed below, you may be eligible to claim them by amending your return.
- Remember: You don’t need to amend your federal return to get the unemployment tax break. The IRS will take care of it and send you any refund you’re owed. This potential amendment is just to claim other credits and deductions you might qualify for now.
Earned Income Tax Credit
- Depends on your filing status
- Married Filing Jointly - your AGI must be below $56,840
- Single, Head of Household or Qualifying Widower - your AGI must be below $50,950
- Married Filing Separately - you don’t qualify
Stimulus & Recovery Rebate Credit
- Depends on your filing status
- Single and Married Filing Separately - your AGI must be below $87,000
- Head of Household - your AGI must be below $124,000
- Married Filing Jointly - your AGI must be below $174,000
- If TurboTax asked you about your stimulus payments when you filed, the IRS will make any adjustments automatically and send you any additional refund you might qualify for.
- If TurboTax didn’t ask you about your stimulus payments when you filed your federal return and your adjusted AGI now meets one of these thresholds, you might be eligible for the Recovery Rebate Credit.
Schedule R Credit
- This credit only applies if you were 65 or older on December 31, 2020, or if you’re disabled and your taxable income is less than $17,500.
- If you’re not a dependent, not a student, and over 18 you could qualify.
- You must have contributed to your retirement account and your adjusted AGI must be less than $33,000 ($49,500 if your filing status is Head of Household, or $66,000 for Married Filing Jointly.)
Premium Tax Credit
- This credit is available to individuals and families who purchased health insurance through the exchange.
- If you paid back any excess advance Premium Tax Credit, the IRS will adjust that amount and send you a refund.
- If the unemployment income exclusion creates a net Premium Tax Credit, and you already filed your return without Form 8962, you’ll receive a letter from the IRS asking for a completed Form 8962. There is no need to amend your return, just respond to the IRS notice.
Additional Child Tax Credit
- If you have children and claimed the child tax credit, you may want to amend to see if there is a benefit. Lower taxes could qualify you for the Additional Child Tax Credit, which is refundable and could put money in your pocket.
If you itemized deductions
- Review your charitable contributions, medical expenses, sales tax and private mortgage insurance deductions. They’re all affected by income limitations.
- If you have some of the above items on your return and took the standard deduction, you may want to consider amending to itemize your deductions if that benefits you more now with the income exclusion.