If you got furloughed or laid off or couldn’t work due to the pandemic in 2020, and you received unemployment benefits, the American Rescue Plan President Biden signed last week might have some money for you in the form of a tax refund.
Usually, unemployment benefits are taxable. But this time it will be different. This will exempt up to $10,200 per person.
For example, let’s say you received $5,000 in unemployment insurance, you won’t pay taxes on any of that. And then if you received $15,000 in unemployment insurance, you’ll pay taxes on $4,800 of that.
This potentially affects a lot of people – 40 million Americans received unemployment payments last year — about 1-in-4 people who had jobs before the pandemic.
The average benefit for most people will be between $1,000 and $1,500.00 plus any previously withheld 2020 income tax on your unemployment benefits received.
If you have already filed your 2020 taxes you will need to file an amended return to get a refund.
The tax exemption will put about $25 billion extra into Americans’ pockets, benefiting those who’ve been unemployed six months or longer needing it the most.
For those who don’t need the money for necessities, the tax savings are likely to fuel more saving, as well as consumer spending.