Live in One of These 11 States? You Could Still Be Paying Taxes on Unemployment Benefits
The coronavirus relief bill allowed for a $10,200 exemption from federal income tax on unemployment insurance payments to taxpayers who had less than $150,000 in modified adjusted gross income in 2020. Most states, but not all, followed suit.
CNN reports that if you live in one of the following states, your total payment will still be subject to state taxes:
- North Carolina
- New York
- Rhode Island
- South Carolina
CNN adds that in Massachusetts, low-income unemployed persons are exempt from paying taxes on their 2020 benefits according to new legislation, unless household earnings are more than 200% above the federal poverty line.
There are several reasons why some states aren’t offering the exclusion. According to CNBC, some states do not impose a personal income tax, and others exclude unemployment income from state tax altogether. It would be a moot point to exempt unemployment benefits in a state where there is no income tax, or income tax on unemployment, to begin with. And states like Indiana and Wisconsin already offer partial tax breaks on unemployment benefits.
It is important to check your individual state’s tax treatment for this year, as it is possible you might be able to deduct the taxes when filing next year.
Since the relief bill was signed in March, it is possible you could have filed taxes early and paid taxes that were not necessary. The IRS will automatically adjust this, and send taxpayers any money owed, CNN reports. Follow up with your own records to make sure you have received the maximum amount.
More From GOBankingRates
- Money’s Most Influential: Where Do Americans Get Their Financial Advice?
- Don’t Miss Out on Nominating Your Favorite Small Business To Be Featured on GOBankingRates — Ends May 31
- ‘Rich Dad Poor Dad’ Author Robert Kiyosaki: You Should Never Say ‘I Can’t Afford That’
- Everything You Need To Know About Taxes This Year