Hi everyone, this is Dr. Nitin Chhoda and welcome to this important episode of Ignition Time.
I have some breaking news for our viewers
and subscribers, specifically those who've been on unemployment benefits.
Remember, more than 40 million of our fellow Americans were on unemployment
benefits at one point or another during the year 2020.
And the $10,200 in federal tax exemptions on unemployment
benefits earned during 2020 for households earning under $150,000
a year has now been amended by the IRS.
There's been a new announcement
from the IRS and this is big news about unemployment benefits.
Welcome to this channel. Welcome.
My name is Dr. Nitin Chhoda with the Ignition Time.
This is breaking news, everyone from Ignition Time.
So here's the big news.
Now, according to the original directive from the IRS, your unemployment benefits
counted towards $150,000 in household income.
Well, now the IRS has actually expanded eligibility.
This is great news, everyone.
The IRS has expanded eligibility for those who essentially received unemployment
benefits so that more people can now get the federal tax break.
What do you mean by this?
Let me show you this article on your screen that was published by CNBC.
And as always, you'll get a link to this article in the description section below.
The IRS makes more people eligible
for the $10,200 unemployment tax break.
So as everyone knows and let me reiterate
the American rescue plan, what it did everyone what it did was it
made the first $10,200 in unemployment benefits during
the year 2020, essentially made it free from federal income taxes, per person.
So if you have a household making up $250,000 a year
and both spouses were receiving unemployment benefits.
Now, this is interesting because if both spouses received it,
this would mean you would have $10,200 plus $10,200
both the spouses would not pay federal income tax on $20,400
of unemployment benefits, but the unemployment benefits were going
to be counted towards $150,000 in revenue.
But now in this new revision from the IRS, this is the big news.
The IRS now says that jobless benefits do
not count towards $150,000 income threshold.
So this is very interesting, because what this does, folks,
is this has new implications on who is able to take advantage of that.
So basically, the IRS issued new guidance.
They just issued new guidance on the unemployment tax break.
This makes more people eligible for the benefits.
What's the bottom line?
Again, the American rescue plan waives federal income tax. Now on the first
$10,200 off unemployment benefits collected last year
in 2020 per person. Now you may still have to pay state income taxes.
So I want to be as clear as I can about that.
Some states have decided to waive state
income tax, but you'll have to get in touch with your state to find
out if they're going to waive state income tax or if they are going to charge you or
if you have to pay state income tax on those unemployment benefits.
But this this essentially this new American rescue plan, initially,
when it was passed, it was assumed or it was implied,
I should say, that ten thousand two hundred dollars in unemployment benefits,
which, by the way, is traditionally considered income,
which is why traditionally unemployment benefits are taxed.
But there's nothing about the past 12 months that has been traditional.
So essentially unemployment benefits were subject to federal income tax.
Then the American rescue plan had indicated that the first ten thousand two
hundred dollars would be tax free now, until today, until today.
The IRS had indicated that taxpayers were supposed to I say supposed to not anymore
supposed to count unemployment benefits as part of their 2020 income in order
to determine whether they qualify for the tax break.
But in brand new guidance, everyone that has been issued by the IRS.
And what is interesting is I'll actually
show you this guidance on your screen right now.
And by the way, I'll provide you with the link to the IRS website as well.
Here's the guidance from the IRS.
This is brand new information, folks.
This is your first year on Ignition Time.
So new exclusion of ten thousand two
hundred dollars off unemployment compensation.
I'll provide you with the link to this
in the description section below so you can definitely check it out.
But, folks, here's the bottom line.
The federal agency, the IRS, said in brand new guidance that workers
can exclude jobless benefits from the calculation of adjusted gross income.
So this is very interesting. So this ruling.
Now, here's what this means. So this rule.
Now, this rule change now means that more people will fall below one hundred fifty
thousand dollar adjusted gross income threshold.
Because now if you're not counting the ten thousand two hundred dollars,
let's say for the husband and the wife, then more people will now fall under
the than under the hundred fifty thousand dollars.
This is very interesting, according to Jeffrey Levine,
who was quoted on CNBC with a certified financial planner.
It definitely expands, meaning the eligibility.
And this is a very generous interpretation of the legislation.
So this is this is a very interesting folks.
So let me give you all an actual example
of how this actually works in the real world.
So let's take the example of a married couple that are filing a joint tax return.
And let's see if they had job income, they had income through their job.
Let's say one of the spouses was making money.
And let's just say again, this is an example.
This is an example.
Let's say one of the spouses made one hundred forty thousand dollars last year.
And let's say that for whatever reason,
they had ten thousand two hundred dollars in unemployment benefits.
So now what happens is if they exceed
the threshold of hundred fifty thousand dollars, if they if they exceeded
the threshold, then this couple would not have qualified for the tax break at all.
Because a joint income would have exceeded
one hundred fifty thousand dollars, right, but now now if the ten thousand two
hundred dollars in this example of one of the spouses is not considered income,
OK, is not considered income when calculating the adjusted gross income,
which, by the way, is a new guideline from the IRS.
So the new IRS calculation or the new IRS
guideline that was just issued will actually make this couple eligible.
So in this case, the you know,
the income of the couple would be under one hundred fifty thousand dollars.
And that would mean that the ten thousand two hundred dollars you would they in this
case, the couple would not pay tax on that.
This is actually very interesting because
this would mean that the more people again qualify, you could also potentially have
a situation where both the couples out on unemployment
and somehow somehow they had more adjusted gross income.
Maybe they made money in the stock market.
Maybe they made money with GameStop, who knows, whatever.
Maybe they made money in other ways.
But now, if they want unemployment
benefits and let's take a new example of both the husband and the wife being
on unemployment and somehow somehow getting, you know, getting groceries,
getting more income from other sources, then in that case, this couple would not
count the ten thousand two hundred dollars for each of them.
In other words, they would not count that income towards
the adjusted gross income and and essentially get a federal tax
exemption of the ten thousand two hundred dollars.
So this new guidance is pretty incredible.
And, you know, it just means that you
don't have to consider your unemployment benefits towards your adjusted gross
income, which now makes more people eligible.
More people eligible to to take advantage of the federal tax waiver because more
people will now fall under the hundred fifty thousand dollar income threshold
because because you don't have to count it as income anymore.
So, folks, this is the breaking news.
This is a this is a new update that I
think is going to be very, very beneficial for many of our fellow Americans.
This was the big news.
No, if you and let's say a member of your family has been receiving unemployment
benefits and you had no other sources of income and there's absolutely no way
your income comes close to hundred fifty thousand, I get it.
But this definitely is big news because
this will expand eligibility for unemployment benefits.
Hopefully you learn something new.
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Let's say someone made income from other sources, but they were still
on unemployment and their adjusted gross income could be close to or above 150 that
those types of individuals do exist, then share this video with them so
that they understand what they need to do when they file their tax returns.
Thank you so much. I appreciate you.
And also provide you with the link to the IRS guidance.
Let me show you the guidance officially
from the IRS website on your screen one more time.
So, folks, this is the IRS website.
This is brand new guidance from the IRS that just emerged today.
This is brand new information.
I hope you learned something new.
Everybody, thank you so much for watching. I appreciate you.
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