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NYS Tax Treatment of Unemployment Compensation

The Federal American Rescue Plan Act of 2021 (ARP) includes a provision that allows certain individuals to exclude up to $10,200 of unemployment compensation received in 2020 from federal gross income.

If your modified adjusted gross income (AGI) is less than $150,000, the new provision allows up to $10,200 of 2020 unemployment payments to be exempt from federal income tax. The exemption is per recipient meaning a married couple who each received $10,200 in unemployment payments would qualify for $20,400 of exemption. If your modified AGI is $150,000 or more, you cannot exclude any unemployment compensation.

New York State has decided to not follow the federal provision meaning all unemployment compensation will be subject to NYS personal income tax.

If your 2020 NYS return has already been filed and the $10,200 unemployment was excluded from NYS taxable income, you must file an amended return. If your 2020 return was filed and you did not take the $10,200 exemption on either federal or state, no further action is needed at this time as the IRS will be making adjustments on their end.

As a reminder, the due date for federal and NYS income tax returns have been extended to May 17, 2021.