State Conformity to the 2020 Federal Unemployment Compensation Exclusion

4/16/21 - The American Rescue Plan of 2021 included a subtraction from federal adjusted gross income of up to $10,200 in unemployment income per person for the 2020 tax year.  Taxpayers who filed their original federal return for tax year 2020 claiming the subtraction should file their Arizona return starting with federal adjusted gross income from their federal return.  Taxpayers that did not take the subtraction on their original federal return and are waiting for the IRS to adjust their return to remove the subtraction should wait to amend their Arizona return.  

Simplified instructions for filing an Arizona amended return can be found by following the link in the notes section.

OTR Tax Notice 2021-07 Federal Unemployment Compensation Exclusion Amended Returns

3/31/21 - Idaho unemployment insurance benefits are taxable by Idaho and should be included in Idaho income when filing 2020 Idaho income tax returns. Any unemployment benefits deducted on federal Form 1040, Schedule 1, line 8, should be added back to the Idaho return as follows: If filing Form 40, report the income on Form 39R, Part A, line 6, "Other Additions." If filing Form 43, don't include the federal unemployment insurance exclusion on line 19, "Other Income." Report the exclusion amount on Form 39NR, Part A, line 4, Column A, "Other Additions."

**TaxSlayer Pro automatically adds back the federal exclusion amount on the Idaho state return.

3/30/21 - Taxpayers will not be required to add back any of the nontaxed unemployment benefits in computing their Illinois base income. If you have filed – See Amended Return Information in the Notes column.

**Illinois uses Federal AGI as a starting point for figuring Illinois taxable income. No adjustments in TaxSlayer Pro are needed.

3/29/21 - Because Iowa is a state that automatically conforms with the Internal Revenue Code, certain unemployment compensation will not be included in Iowa income. Based on the federal legislation, the first $10,200 of unemployment compensation income is excluded from taxation for qualifying taxpayers. Because the federal legislation was enacted subsequent to many taxpayers filing their returns, taxpayers were unable to take advantage of this change. As a result and to assist these taxpayers, the Department will begin making unemployment compensation related automatic adjustments. The adjustment process may take up to 90 days due to cross-checking these amounts against 1099s and validating eligibility to ensure accuracy and eliminate fraud. Taxpayers will not need to file an amended Iowa tax return if their only adjustment pertains to unemployment compensation. Taxpayers filing an original 2020 individual income tax return should report the unemployment compensation exclusion amount on Form IA 1040, line 14, using a code of M.

4/1/21 - All unemployment compensation earned as a Kentucky resident is subject to Kentucky income tax. For Kentucky residents, any amount excluded up to the $10,200 on a taxpayer's federal income tax return is required to be added back on the Kentucky individual income tax return on Schedule M, Line 5 as an "Other Addition". For part-year Kentucky residents, the amount should be included on the Form 740-NP, Section B, Column B, line 13 as unemployment compensation. The Kentucky return should be amended if a taxpayer previously filed and did not add back the excluded unemployment insurance.

**TaxSlayer Pro automatically adds back the federal exclusion amount on line 5 of Schedule M.

3/26/21 - The first $10,200 of unemployment benefits paid to Louisiana residents who received them in 2020 are exempt from Louisiana state income tax. The federal American Rescue Plan, signed into law on March 11, 2021, excludes from gross income the first $10,200 of unemployment benefits received in 2020 by taxpayers with incomes less than $150,000. The tax relief extends to individuals who received benefits through state unemployment insurance programs, including any increased benefits from the federal CARES Act and other federal relief legislation. For state tax purposes, the first $10,200 of unemployment benefits will not be included in the calculation of adjusted gross income for Louisiana income tax. For married couples filing jointly, the exclusion applies to the first $10,200 received by each spouse. Louisiana taxpayers who have not yet filed their 2020 state income taxes should follow the instructions on the resident or non-resident state income tax return, depending on their residency status. Those who have filed their state taxes already will need to file an amended state return to reduce their Louisiana adjusted gross income by the appropriate amount.

*Louisiana uses Federal AGI as a starting point for figuring Louisiana taxable income. No adjustments in TaxSlayer Pro are needed.

4/7//21 - If you received unemployment benefits in 2020, you may be eligible to claim an exemption from both Maine and federal income tax. If you have an annual income of less than $150,000, regardless of filing status, recently enacted legislation exempts up to $10,200 in unemployment benefits from both federal and state income tax for tax year 2020.

*Maine uses Federal AGI as a starting point for figuring Maine taxable income. No adjustments in TaxSlayer Pro are needed. TaxSlayer Pro automatically pulls the federal exemption amount to Schedule PTFC when figuring the Property Tax fairness Credit.