Does anyone know why my unemployment isn't being added to my federal AGI, so when I go to do my VA taxes, it subtracts my unemployment from AGI which is only W2 wages?

[mmiltchelllabrie]

Because it's subtracting my unemployment, my taxable income is like $80 and so it's giving me all my state taxes back which is not correct.

[JohnW152]

As part of the recently-passed American Rescue Plan, the first $10,200 in unemployment payments are now tax-free for households with annual incomes less than $150,000 on their federal return. 

[NCperson]

@mmiltchelllabrie - it does not appear that unemployment income is taxable in VA.   I have the VA state form and sure enough when I entered the unemployment, it is added on the federal form and subtracted on the VA form

Once Turbo tax updates the federal form, what should occur is that it is deducted on the federal form and then you should see no adjustment on the state form (I am using the desktop version)

if you are stating that the online software has been updated and not included on the federal form and then subtracted AGAIN on the state form, that may be a bug!

@JohnW152 

[savafritts]

Yes I believe TurboTax has a bug in the State of Virginia software.  Does anyone from Turbotax monitor this blog?  I spent an hour on the phone trying to explain to someone what I thought was wrong, to no avail.  She dismissed me and just kept repeating her canned answers.   If Virgnia is wrong probably all states that do not tax unemployment benefits are incorrect as well. 

[NCperson]

now that a week has gone by I reviewed the DESKTOP version ....it works correctly for VA... no matter how much  I enter on a 1099-G (I even tried $100,000), there is no change on the VA tax due.  that is correct as VA excludes unemployment from income tax.  That wasn't true when I wrote the note above a week ago, 

have you tried to test the VA tax return this weekend? is it still wrong? 

[savafritts]

My State of VA return has not changed since 3/26 update for federal, but I have been in contact with a TurboTax CPA and we went over the State of VA form.  My difference came from lines 4A and 4B which is the Age Deduction calculation which is based on Federal Adjusted Gross income (which has been reduced by $10,200).  This Age deduction comes into play for taxpayers born on or between January 2, 1939 and January 1, 1956.  If you are within this age and are filing 1040-SR I believe calculations are correct even though it appears to be double counting the 10,200.  Make sense?  I suspect it's an unintentional result of this age deduction.  (yippie for us oldies)