Unemployment Compensation Exclusion FAQs

The American Rescue Plan Act of 2021 provides relief to individuals who received unemployment compensation in 2020. It excludes up to $10,200 of their unemployment compensation from their gross income if their modified adjusted gross income is less than $150,000. IRS has posted unemployment compensation exclusion FAQs on the following topics:
  • Amended Return (Form 1040-X)
  • Calculating the Exclusion
  • Claiming the Exclusion (Before Filing)
  • Eligibility
  • Finding the Unemployment Compensation Amount
  • Impact to Income, Credits, and Deductions
  • Post Unemployment Compensation Exclusion Adjustment
  • Receiving a Refund, Letter, or Notice
  • Victims of Unemployment Fraud

Please note that Question 4 under Eligibility addresses the dilemma of how to handle unemployment compensation and the $10,200 income exclusion for taxpayers who are MFS in a community property state.