2020 Unemployment Compensation Exemption
On March 11, 2021, President Biden signed into law the American Rescue Plan Act which retroactively excludes up to $10,200 of unemployment compensation from gross income if modified adjusted gross income (MAGI) is less than $150,000 for tax year 2020.
For married taxpayers, each spouse receiving unemployment compensation may exclude up to $10,200. The MAGI limit applies to all filing statuses. If modified AGI is $150,000 or higher, taxpayers cannot exclude any unemployment compensation.
If taxpayers filed their 2020 federal income tax return before the new tax law was enacted, the IRS is automatically adjusting returns for the unemployment compensation exclusion and issuing refunds. The IRS does not want anyone to file an amended return unless other items are impacted on the tax return such as qualifying for new tax credits since income is lower.
