2020 unemployment compensation exclusion FAQs — Topic B: Calculating the exclusion

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

Q1. How much unemployment compensation do I exclude from my gross income? (added April 29, 2021)

A1. If eligible, exclude up to $10,200 of unemployment compensation paid to you in 2020 (and up to another $10,200 of unemployment compensation paid to your spouse if you're married and file a joint tax return). You don't have to pay tax on unemployment compensation that is excluded from your gross income.

Example 1: You're single and your modified AGI is less than $150,000. If you received a total of $3,500 in unemployment compensation in 2020, exclude $3,500 in unemployment compensation from your gross income so that none of your unemployment compensation is taxable. If you received $15,000 in unemployment compensation, exclude $10,200 from your gross income so that only $4,800 (that is, $15,000 minus $10,200) is taxable.

Example 2: You're married and file a joint return with your spouse. Your joint modified AGI is less than $150,000. If you received $15,000 in unemployment compensation and your spouse received $10,000 in unemployment compensation, exclude $10,200 of your unemployment compensation and all $10,000 of your spouse's unemployment compensation so that only $4,800 of your unemployment compensation is taxable.

Use the Unemployment Compensation Exclusion Worksheet in the Instructions for Schedule 1 in the 2020 Form 1040 and 1040-SR instructions to figure the amount to exclude.

If you're married and 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 only for an exclusion up to $10,200.

Q2. What do you mean by "modified adjusted gross income (MAGI)"? (added June 25, 2021)

A2. For purposes of this exclusion, the MAGI is your adjusted gross income reported on Line 11 of Form 1040, 1040-SR or 1040-NR minus the full amount of unemployment compensation reported on Schedule 1, Line 7.

You can also use the Unemployment Compensation Exclusion Worksheet in the Form 1040/1040-SR instructions for Schedule 1 to figure your MAGI.

Q3. What if my unemployment compensation is more than $10,200? (added April 29, 2021)

A3. If eligible, you should exclude only the lesser of your unemployment compensation amount reported on Schedule 1, Line 7, or $10,200 from your gross income. Amounts over $10,200 are still taxable. If your spouse is eligible and you file a joint return with your spouse, you should also exclude the lesser of your spouse's unemployment compensation amount reported on Schedule 1, line 7, or $10,200 from your gross income. The $10,200 limitation applies to each spouse individually, not jointly.