2021 Unemployment Benefits

[bobmthompson01]

Will my 2021 unemployment benefits be taxed?

[OpeA1]

Hello,

Is unemployment taxed?

Typically, unemployment income is taxable and should be included with any other taxable income you have in the year.

Some states also count unemployment benefits as taxable income. When it’s time to file your taxes, you will need Form 1099-G which will show the amount of unemployment income you received.

It will also show any federal taxes you had taken out of your unemployment pay.  The 1099-G is only available online in many states, so you may need to log into your unemployment account to get the form.

We do not know as yet if there will be a change in the tax laws regarding 2021 unemployment taxes. So, stay tuned!!

[RossP88]

Hi! I'm a TurboTax Live CPA. As of right now the IRS has not published guidance for 2021 unemployment taxation. It is possible that there will be another exemption but it is also possible that it will be fully taxable. 

[tsmeadow]

Hello @bobmthompson01,

I hope you are doing well today.  You have received unemployment benefits for tax year 2021.  You want to know if the 2021 unemployment benefits will be taxable when you file your 2021 return.   

To answer your question, Yes, currently all unemployment income will be taxable when you file your 2021 federal tax return.  The American Rescue Plan that was enacted on March 11, 2021, excluded from taxable income $10,200 in unemployment benefits for tax year 2020.   However, the American Rescue Plan did not create a similar unemployment income exclusion for 2021.  

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

As of today's date (September 9, 2021), United States Congress has not enacted a plan similar to the American Rescue Plan to exclude unemployment income from being taxable on your 2021 tax return.  Therefore, all unemployment income will be taxable on the Federal level.  Please find below a link to an article describing 2021 unemployment benefits being taxable.  

Link: https://www.cnbc.com/2021/07/12/dont-count-on-another-tax-break-on-unemployment-benefits.html

I hope this answers your question.  Thanks for using Turbotax Live!

Taylor, Tax Attorney, 11 Years

[LostinArkie88]

The last update on 2021 unemployment benefits being taxed by the IRS was in September, 2021.

Has there been any change by the IRS or will the benefits still be taxed?

In Arkansas, according to Act 154, the unemployment benefits received in 2021 will not be taxed by the state.

I look forward to your response.  Thank you.

[DoninGA]

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@LostinArkie88 wrote:

The last update on 2021 unemployment benefits being taxed by the IRS was in September, 2021.

Has there been any change by the IRS or will the benefits still be taxed?

In Arkansas, according to Act 154, the unemployment benefits received in 2021 will not be taxed by the state.

I look forward to your response.  Thank you.

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The unemployment compensation exclusion on a federal tax return was only for tax year 2020.