The married filing joint couple’s AGI after the unemployment adjustment also allows them to reap the benefit of the 2021 federal recovery rebate. The recovery rebate was still supported in the Senate bill, but the AGI limitations which resulted in a gradual phase out of the rebate dropped significantly. While the Senate bill allows for a taxpayer recovery rebate of $1,400 ($2,800 in the case of a joint return) and an additional amount of $500 for each additional dependent, married filing joint taxpayers with an AGI of $100,000 or more are not eligible for the rebate. In our example above, with the taxpayers excluding their 2020 unemployment compensation, they now also qualify for a 2021 recovery rebate of $2,800 even with no dependents. Head of household taxpayers must have an AGI below $75,000 before they are completely phased out of the rebate, and single taxpayers limited to $50,000 of AGI before losing the rebate in its entirety. The ability to exclude up to $10,200 of 2020 unemployment compensation could very well be what many taxpayers needed in order to navigate below the AGI thresholds and qualify for the recovery rebate. The refunds will happen in two waves: Taxpayers eligible for the up to 10,200 exclusion who have already filed 2020 taxes claiming their unemployment insurance benefits. A quirk in eligibility rules for a new unemployment tax break may lead some married couples to wonder whether they should file separate returns, even if they typically file jointly. According to the IRS, if you file a Married Filing Joint return for a community property state, half of your unemployment and.
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