LANSING, Mich. (WLNS)—President Biden recently signed the American Rescue Plan Act of 2021. The bill provides additional relief to address the continued impact of COVID-19 pandemic on the economy, public health, local state governments, people and businesses impacted.
The $1.9 trillion dollar COVID relief bill also provides a tax break on unemployment benefits that were received in 2020. The American Rescue Plan Act of 2021 allows each tax filer facing unemployment to waive up to $10,200.00 in federal taxes.
Nick Juhle, the Senior Vice President and Director of research for Greenleaf Trust, a Michigan-based investment company provided insight regarding the legislation. Juhle states, this bill could help thousands who were impacted poorly by the economy and provide benefits to the 40 million Americans who received unemployment benefits in 2020.
“A person in the applicable tax bracket could be responsible for about a $2,500 tax bill this spring which is kind of tough to hand out unemployment benefits to try to provide aid,” Juhle said,” but then also ask for a portion of it back in taxes you know come spring.”
Professor Stephen Schiestel teaches business and finance at Michigan State University he talked with WLNS reporter Samana Sheikh, and also agrees the first 10,200 dollars in federal taxes won’t be taxed. However, Schiestel says that’s only if you’re 2020 adjusted gross income stays under 150,000 dollars.
“Whether you’re filing single, whether you’re filing separately, whether you’re filing jointly… $150,000 applies all across everyone,” Schiestel exclaimed.
Schiestel reccomends checking online if you already applied for your 2020 tax return this year.
“If you have already filed it would probably be a great time to reach back out to your tax preparer or just check online to see how you could recalculate the taxes in order to take advantage of this.”
Schiestel and Juhle state this area of the legislation could reduce your tax bill and could even increase an individual’s tax refund.
However, it’s crucial for Michigan-residents to understand the tax-break applies to individual federal taxes for this year only, and this tax-break does not apply to your individual state liabilities.