Posted on | February 24, 2010 | 7 Comments
Unemployment Benefits Receive a Special Tax Break
Thanks to the American Recovery and Reinvestment Act of 2009, unemployment benefits received during last year are eligible for a special tax break. This includes state unemployment benefits, railroad unemployment compensation, and benefits from the District of Columbia.
The first $2,400 you received for unemployment benefits during 2009 are now tax free. All other benefits are taxed normally, the way unemployment benefits were taxed in the past. This could save you $480 in taxes if your tax rates is 20%.
Take a look at the 1099-G when it arrives in your mail to discover your income from unemployment benefits last year. And if your spouse also received benefits, God forbid, they will not have to pay tax on the same amount of income. When completing your tax forms, subtract the $2,400 from the amount in box 1 of the 1099-G and enter this new amount on your 1040 where appropriate.