The American Rescue Plan Act includes changes that retroactively affect 2020 returns, including making the first $10,200 in unemployment benefits tax-free for many taxpayers.

If your modified adjusted gross income (AGI) is less than $150,000, the American Rescue Plan enacted on March 11, 2021, excludes from income up to $10,200 of unemployment compensation paid in 2020, which means you don’t have to pay tax on unemployment compensation of up to $10,200. If you are married, each spouse receiving unemployment compensation doesn’t have to pay tax on unemployment compensation of up to $10,200. Amounts over $10,200 for each individual are still taxable. If your modified AGI is $150,000 or more, you can’t exclude any unemployment compensation.

The $10,200 income exclusion is intended to cover 17 weeks of the additional $600 federal benefit passed under the Coronavirus Aid, Relief & Economic Security (CARES) Act.

For those who have received unemployment benefits but have not yet filed their returns, the IRS suggests waiting until revised forms and instructions are available before considering filing.

For those who have received unemployment benefits in 2020 and already filed their 2020 tax returns, the IRS emphasizes an amended return should not be filed at this time until additional guidance is issued.