2020 Unemployment Compensation Exclusion FAQs — Topic A: Eligibility

These updated FAQs were released to the public in Fact Sheet 2022-39 PDF, December 2, 2022.

Q1. Am I eligible to exclude my unemployment compensation? (added April 29, 2021)

A1. It depends. You're eligible to exclude the unemployment compensation if it was received in 2020 and your modified adjusted gross income (AGI) is less than $150,000. The modified AGI for purposes of qualifying for this exclusion is your adjusted gross income for 2020 minus the total unemployment compensation you received. This threshold stays the same for all filing statuses, regardless of whether you're married and file a joint tax return (it doesn't double to $300,000).

To determine if you're under the $150,000 threshold and qualify for the exclusion, subtract all of the unemployment compensation reported on Schedule 1, Line 7, from the amount of your AGI reported on Line 11 of Form 1040, 1040-SR, or 1040-NR.

If you're eligible, you should exclude up to $10,200 of your unemployment compensation from income on your 2020 Form 1040, 1040-SR, or 1040-NR. This means up to $10,200 of unemployment compensation is not taxable on your 2020 tax return. Unemployment compensation amounts over $10,200 are still taxable.

If you're married, the exclusion can apply to you and a separate exclusion can apply to your spouse. If you and your spouse file a joint return and your joint modified AGI is less than $150,000, you should exclude up to $10,200 of your unemployment compensation and up to $10,200 of your spouse's unemployment compensation.

If you file Form 1040-NR or file Form 1040 or 1040-SR separately from your spouse, you generally don't report your spouse's unemployment compensation on your tax return. You can't exclude any of your spouse's unemployment compensation that's not reported on your tax return, even if you claim your spouse as a dependent. You're eligible to exclude only up to $10,200 of the unemployment compensation you received in 2020.

If your modified AGI is $150,000 or more, you can't exclude any unemployment compensation from your income. This applies to all filing statuses.

Example: You are single and your AGI amount on Line 11 of your Form 1040 is $170,000. The amount on Schedule 1, Line 7, is $25,000. Subtract the $25,000 amount from $170,000, the result is $145,000. Your modified AGI is $145,000 for the purpose of determining if your modified AGI is less than $150,000 to qualify for this exclusion.

For further assistance in calculating your modified AGI, use the Unemployment Compensation Exclusion Worksheet in the Instructions for Schedule 1 in the 2020 Form 1040 and 1040-SR instructions.

Q2. If I have an IRS Individual Taxpayer Identification Number (ITIN) instead of a Social Security number (SSN), am I eligible for the exclusion? (added April 29, 2021)

A2: Yes. Individuals with a valid ITIN are eligible for the exclusion, the same as those with a valid SSN. Their modified AGI must be less than $150,000 regardless of their filing status.

Q3. I'm a non-resident alien who files Form 1040-NR. Am I eligible for the exclusion? (added April 29, 2021)

A3. Yes. You should exclude up to $10,200 of your unemployment compensation in 2020 if your modified AGI is less than $150,000. If you're married, your spouse generally reports their unemployment compensation on their Form 1040-NR and excludes up to $10,200 of unemployment compensation paid to your spouse on that return if their modified AGI is less than $150,000. You can't exclude any of your spouse's unemployment compensation that's not reported on your tax return, even if you claim your spouse as a dependent.

Q4. I'm married and live in a community property state. Am I eligible for the exclusion? (updated July 7, 2021)

A4. Yes. Because you live in a community property state, if you file a Married Filing Separately return, you report half of your unemployment compensation and half of your spouse's unemployment compensation on your tax return and your spouse reports the other half of your unemployment compensation and half of his or her unemployment compensation on his or her tax return. You should exclude up to $10,200 on your tax return if your modified AGI is less than $150,000. Your spouse should exclude up to another $10,200 on his or her tax return if your spouse's modified AGI is less than $150,000. Neither of you should exclude more than the amount of unemployment compensation you report on your Schedule 1, Line 7.

If you file a Married Filing Jointly return, when completing the Unemployment Compensation Exclusion Worksheet – Schedule 1, Line 8, you should report half of your unemployment compensation and half of your spouse's unemployment compensation on line 8 of the worksheet and your spouse reports the other half of your unemployment compensation and half of his or her unemployment compensation on line 9 of the worksheet.  Do not enter more than $10,200 on either line 8 or line 9 of the worksheet.  If your joint modified AGI is less than $150,000, you and your spouse can exclude up to $10,200 each. Do not exclude more than the amount of unemployment compensation you report on your Schedule 1, Line 7.

If you already filed your return and entered a smaller exclusion amount on Schedule 1, line 8 than you are entitled to, see Do I need to file an amended return if I live in a community property state and did not enter the correct exclusion amount on Schedule 1, line 8?

Q5. Am I eligible for the exclusion if I live in American Samoa, the Commonwealth of the Northern Mariana Islands, Guam, Puerto Rico, or the U.S. Virgin Islands? (added June 25, 2021)

A5. Residents of U.S. territories (American Samoa, the Commonwealth of the Northern Mariana Islands, Guam, the Commonwealth of Puerto Rico, and the U.S. Virgin Islands) who receive unemployment compensation payments that are otherwise subject to U.S. income tax, may be eligible to exclude up to $10,200 per person of unemployment compensation from U.S. income tax for 2020.

Eligible residents must have modified adjusted income of less than $150,000 to exclude up to $10,200 of unemployment compensation from their 2020 federal income tax return. In the case of taxpayers that are married filing jointly, the maximum exclusion would be $10,200 for each spouse for a maximum of $20,400.  You may not exclude more than the amount of unemployment compensation you (and your spouse if filing jointly) actually received.  

U.S. territory residents with questions relating to the taxation of COVID-related unemployment compensation by the territory should contact their territory tax department.  More information is also available in News Release IR-2021-81, IRS reminds U.S. territory residents about U.S. income tax rules relating to pandemic unemployment compensation. 

Q6. I was unemployed in 2020, but payment of my unemployment compensation was delayed until 2021. Do I qualify for the unemployment compensation exclusion? (added March 23, 2022)

A6. No, the American Rescue Plan provides unemployment compensation exclusion relief only for unemployment compensation received in 2020. The exclusion does not apply to unemployment compensation that was received in 2021.