2020 unemployment compensation exclusion FAQs — Topic E: Impact to income, credits, and deductions

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

Q1. Will this exclusion affect how I calculate certain income and/or credits on my 2020 tax return? (added April 29, 2021)

A1. Yes. When figuring modified adjusted gross income for any of the following deductions or exclusions, include the full amount of your unemployment compensation reported on Schedule 1, Line 7, unreduced by any exclusion amount:

• Taxable Social Security Benefits (Social Security Benefits Worksheet in the Instructions for Form 1040 and 1040-SR)
• IRA Deduction (IRA Deduction Worksheet in the Instructions for Schedule 1 in the Instructions for Form 1040 and 1040-SR)
• Student Loan Interest Deduction (Student Loan Interest Deduction Worksheet in the Instructions for Schedule 1 in the Instructions for Form 1040 and 1040-SR)
• The exclusion of Interest from Series EE and I U.S. Savings Bonds issued after 1989 (Form 8815)
• The exclusion of Employer-Provided Adoption Benefits (Form 8839)
• Tuition and Fees Deduction (Form 8917)
• The deduction of up to $25,000 for active participation in a Passive Rental Real Estate Activity (Form 8582)

See the specific form or instructions for more information.

Q2. Will the IRS automatically adjust other impacted items on my return if I claimed them originally, such as credits and deductions? (updated December 2, 2022)

A2. No. The IRS is no longer automatically correcting your 2020 account and recalculating any credit or deduction that was claimed on the original return impacted by the unemployment compensation exclusion. Refer to Topic D: Amended Return (Form 1040-X) to determine if you need to file an amended return.