Has Unemployment Insurance Been Extended?
Hey y’all! I wanted to take a quick minute to talk about the unemployment changes as part of the new American rescue plan, which was just recently passed by President Joe Biden. This does a couple of things. So the first thing that it does is it extends the unemployment insurance duration, meaning that extra three hundred dollars a week for unemployment benefits. It extends that it was supposed to expire, I believe, March 6th. And I think that’s going all the way up until September the 14th, I believe. But it’s mid-September that got extended until. So if you’re receiving unemployment benefits that will not expire at early March like you thought it might, it’s going to extend beyond there.
Are Unemployment Benefits Taxable?
The next thing and this is a pretty important one, actually, for those of you who potentially are filing tax returns right now, if you are if you drew unemployment at any point in twenty twenty, they essentially made a change to the taxability of certain unemployment benefits. Essentially up to ten thousand two hundred dollars of your unemployment could possibly be considered non-taxable. So this was a change, by the way, that was made retroactive for 2020. So if you’re in the process of filing a tax return now or even if you have already filed and you had unemployment in 2020, you need to reach out to a competent tax adviser, a la Molen & Associates, because you may potentially need to amend a tax return or need to change how you’re filing. The ten thousand two hundred dollars is actually doubled for those who follow married filing joint return where both spouses are receiving unemployment.
What Changes Came From the American Rescue Plan?
So it’s up to ten thousand two hundred dollars for most folks. But if both spouses happen to be drawing unemployment, then it may be extended up to the twenty thousand four hundred dollars mark or two times the amount. So that ten thousand two hundred dollars will potentially save you quite a bit. But before we talk about what it saves you, let’s talk about the limiting factors. Essentially, there is an income threshold at which you don’t qualify for the ten thousand two hundred dollar exemption from income on the unemployment. That marker is it’s one hundred and fifty thousand dollars of adjusted gross income. OK, now I have read the bill directly and it does not reference whether it’s one hundred and fifty thousand only for married filing joint filers or for single filers. So our assumption is if you file a tax return, whether whether you’re single or married, filing jointly or married, filing separate, that number is one hundred and fifty thousand dollars. Now, there may be more information or more guidelines provided on that, but for now, that is what the bill actually says. The second piece of this is there is not a ratable range. And what I mean by that is a period of income at which it slowly phases out that exemption. Now, that’s actually pretty unusual for income taxes, because typically, if you have, you know, one hundred and forty nine thousand nine hundred and ninety nine dollars of adjusted gross income and you just earned one or two dollars too much, there’s usually a ratable portion.
Is There a Phase Out Range for the Unemployment Tax Break?
Take, for example, the new stimulus that starts at one hundred and fifty thousand and by one hundred and sixty thousand for married filing joint filers. It phases out entirely. That ten thousand dollar cushion, if you will, is a ratable portion where you get a portion of that stimulus, unemployment. This this exemption of ten thousand two hundred dollars does not exist. A ratable portion does not exist under the bill, which means if you have one hundred and forty nine thousand nine hundred ninety nine dollars of adjusted gross income and you received unemployment, congratulations. You will qualify for the entire ten thousand two hundred dollar exemption. But if you had one hundred and fifty thousand dollars of adjusted gross income, you would not. So that’s pretty unusual.
How Much Can I Save Because of Unemployment Benefits Not Being Taxed?
And I want to make sure and mention that just to give you an idea of what type of tax savings this actually entails, if you are in a 22 percent tax bracket, it’s worth about tax savings of about twenty two hundred dollars. Remember, this is about 10 grand we’re talking about in savings. So the math is pretty easy there. If you’re in a 12 percent tax bracket, then it’s about twelve hundred dollars, 10 percent tax bracket. Twenty four percent tax bracket. You can do the math. It just depends on what bracket you’re in. So if you have any other questions about this or how to actually go about claiming this exemption, then then you should reach out to us and let us know. We are always happy to help. Thanks for listening.