March 23rd IRS - unemployment not counted towards MAGI for $10,200 unemployment credit

[JamesG1]

@Manamok

The new worksheet uses 1040 line 6, the taxable amount of Social Security benefits.

New Exclusion of up to $10,200 of Unemployment Compensation states:

Unemployment Compensation Exclusion Worksheet – Schedule 1, Line 8

1. If you are filing Form 1040 or 1040-SR, enter the total of lines 1 through 7 of Form 1040 or 1040-SR. If you are filing Form 1040-NR, enter the total of lines 1a, 1b, and lines 2 through 7.

[DoninGA]

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@Manamok wrote:

DoninGA - Thank you for your response.

Did I misread the IRS explanation?  I thought that the listed items - including "taxable social security benefits" were able to be subtracted from the AGI when calculating the MAGI for the Unemployment Compensation Exclusion Worksheet.  No?

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You misread the IRS explanation.  The total of the unemployment compensation received is included when calculating MAGI for Social Security taxable benefits.

[Manamok]

Got it.  I thought the sentence "When figuring the following deductions or exclusions from income..." was suggesting those listed items could be excluded when calculating your MAGI for the $10,200 unemployment exclusion.

[weilu2018]

Is this changed on MAGI? it looks did not changed it so impact IRA contribution deduction.

[ReneeM7122]

Yes, the unemployment credit is changed on MAGI.  Here is an FAQ about the exemption and here is a TurboTax article about the difference between MAGI and AGI.  It should not impact the IRA contribution deduction.

@weilu2018

[55dorota55]

I just noticed today that TT still didn’t update few things. 1.$10200 is still included in income for calculating the taxable portion of social security.                                                2. $10200 is still included in calculation of MAGI for IRA contribution.  Hoping to see those updates soon.

[DoninGA]

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@55dorota55 wrote:

I just noticed today that TT still didn’t update few things. 1.$10200 is still included in income for calculating the taxable portion of social security.                                                2. $10200 is still included in calculation of MAGI for IRA contribution.  Hoping to see those updates soon.

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Go to this IRS website for what is included when calculating taxable SS benefits and IRA contributions in reference to the unemployment compensation exclusion - https://www.irs.gov/forms-pubs/new-exclusion-of-up-to-10200-of-unemployment-compensation

When figuring any of the following deductions or exclusions, include the full amount of your unemployment benefits reported on Schedule 1, line 7 (unreduced by any exclusion amount): taxable social security benefits, IRA deduction, student loan interest deduction, nontaxable amount of Olympic or Paralympic medals and USOC prize money, the exclusion of interest from Series EE and I U.S. Savings Bonds issued after 1989, the exclusion of employer-provided adoption benefits, the tuition and fees deduction, and the deduction of up to $25,000 for active participation in a passive rental real estate activity.

[dmertz]

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@55dorota55 wrote:

I just noticed today that TT still didn’t update few things. 1.$10200 is still included in income for calculating the taxable portion of social security.                                                2. $10200 is still included in calculation of MAGI for IRA contribution.  Hoping to see those updates soon.

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TurboTax is behaving correctly.  When calculating the MAGI for each of these purposes, the exclusion for unemployment credit is required to be added back to AGI.

[ksl36]

Turbotax performed an update upon opening the program today, April 12th.  We are still experiencing the issue where unemployment is not counted in calculating MAGI.  Therefore, Turbotax is deducting the $10,200 unemployment credit when it should not be.  However, the full value of the unemployment income is included on Line 7 of Schedule 1 - Additional Income and Adjustments To Income but incorrectly deducting the $10,200.  The Schedule 1 Line 8 - Other Income Statement shows that the "Unemployment Compensation Exclusion Smart Worksheet" also does not include unemployment in its calculation on Line A from the 1040 or Schedule 1.  This is causing the issue of underreporting MAGI.

[dmertz]

@ksl36 , MAGI for what purpose?  Nobody has posted on this thread any specific situation where the $10,200 exclusion is being incorrectly factored into MAGI for some particular purpose (although some have mistakenly thought they had identified an incorrect calculation).

[ksl36]

MAGI for the purpose of being eligible or ineligible for the $10,200 tax waiver.  It is causing the MAGI to be calculated artificially low.

[dmertz]

TurboTax is correctly calculating MAGI for the purpose of the exclusion of unemployment compensation.  It's precisely following the procedure provided by the IRS:

https://www.irs.gov/forms-pubs/new-exclusion-of-up-to-10200-of-unemployment-compensation

The American Rescue Plan Act of 2021 which added subsection 85(c)(2)(B) to the tax code to implement this exclusion includes subsection 85(c)(2)(B) which stipulates that unemployment compensation is not to be included in MAGI for this purpose.

[rcea]

Hi since the last update it shows  that the 10,200 exemption will not be included with the AGI. If my AGI went below the 150k now Do I qualify for a stimulus?  If so will they automatically do it?

[KathrynG3]

The unemployment compensation exclusion does reduce adjusted gross income (AGI). The stimulus payments would be reduced but not eliminated for married filing jointly filers with adjusted gross income more than $150,000.

However, the Recovery Rebate Credit is only for collecting eligible amounts that have not been received.

For more information, see:  

First Stimulus Payment Calculation

Second Stimulus Payment Calculation

[JYN1]

weilu2018 - was unemployment income being added to your AGI to come up with MAGI and limiting your IRA contribution?