I just got an email today saying that the $10,200 deduction for unemployment income DOES apply to BOTH 2020 and 2021 tax returns. The email says that the IRS and the DOR will automatically adjust tax returns if you've already filed, which I did, and that once the additional $10,200 deduction is applied to your Adjusted Gross Income that any additional money you may be owed in a refund would be sent out to you by the IRS. The email went on to say that they expect to adjust everyone's taxes in mid May, which I'm assuming is around the time of the tax deadline that they extended it to from April 15th extension. I will try to copy / paste the email I got below....
On April 1, 2021, Governor Baker signed legislation which allows taxpayers with household income up to 200% of the federal poverty level to deduct up to $10,200 of unemployment compensation from taxable income on their Massachusetts tax return. The deduction may be claimed by each eligible individual for tax years 2020 and 2021. Federal law allows a deduction of up to $10,200 if your federal adjusted gross income is less than $150,000. Since the Massachusetts income threshold is different from the federal income threshold, you may be eligible for a deduction on your federal tax return, but not on your Massachusetts tax return.
If you have already filed your 2020 Massachusetts income tax return and you believe you are eligible for this deduction, there is no need to file an amended return. The Massachusetts Department of Revenue (DOR) will recalculate all tax returns that included unemployment income and will adjust your return if you are eligible. If your return is adjusted, your reported tax for 2020 will be reduced and you may be entitled to a refund. If you have no outstanding liabilities, DOR will mail the refund directly to you. DOR expects to begin issuing these refunds in mid-May and will provide updates about when you can expect to receive them in the FAQs on their website.
If you have not filed your 2020 Massachusetts income tax return yet, you should report the full amount of your unemployment income on your Massachusetts return using line 8a on resident tax returns (Form 1) or line 10a on nonresident/part-year resident tax returns (Form NR/PY). If you are eligible for a deduction, you should report the amount of the allowable deduction on Schedule Y, line 9.
You can find more information about the new deduction in the FAQs on DOR’s website. If you have any other questions or concerns, please contact DOR at [phone number removed] or online through your MassTaxConnect account.
