It's a confusing time for Americans wondering how to make sense of changing deadlines and new financial assistance. Here is a summary of what financial help may be taxable and what is not.
Economic Impact Payments (Stimulus Payments)
- Federal: The payments are not taxable, and they will not reduce a taxpayer’s refund or increase the amount they owe on their 2020 or 2021 tax returns. The IRS has provided several FAQs about reconciling the economic impact payment on your 2020 federal tax return.
- New Jersey: According to the New Jersey Division of Taxation, economic impact payments are not subject to income tax in New Jersey and should not be reported on your New Jersey income tax return.
- Federal: The new COVID-19 relief bill, the American Rescue Plan, signed by President Biden on March 11 waives federal taxes on an individual’s first $10,200 of unemployment benefits collected last year. Married couples who file a joint tax return wouldn’t be taxed on the first $20,400 of unemployment income. The federal tax break applies to individuals and married couples who made less than $150,000 in adjusted gross income in 2020.
- New Jersey: Unemployment compensation received from the State of New Jersey, as well as the additional $600 per week provided as part of the CARES Act, is not taxable on your New Jersey tax return.