Tax Tips for Unemployment Benefits
As crazy as it sounds, the government taxes unemployment benefits at both the federal and state levels. Fortunately, there is a good chance you will get a tax refund if you have had taxes withheld, and qualify for one of the many available credits.
What Do I Pay Tax On?
- Any severance or unemployment benefits received are considered taxable income. If you received unemployment benefits, these will be reflected on a form 1099-G, which shows income received from a government source.
- If you elected to have taxes automatically withheld, you will likely not have to pay more taxes, and you may even receive a refund.
- Note: Even if you had taxes withheld, you still have to file a tax return.
Tax Deductions You Need To Know
- Job Search Costs – If you spent money while searching for a job during 2010, these costs are deductible. Examples include transportation (e.g. gasoline), phone calls, and supplies (e.g. resume printing).
- COBRA & Health Insurance – If your healthcare costs amounted to more than 25% of your income, these costs may be tax deductible.
While filing taxes may not be the most fun activity, the good news is you can save money by doing them yourself. H&R Block is easy to use and offers free preparation and filing of your return. Note: Their website is has a secure connection, so it may take a minute for the page to load.
Tax Credits You Should Be Aware Of
- Earned Income Tax Credit – If your income for 2010 was below a certain level, you can receive a credit of up to approximately $5,700. To qualify, your income has to be approximately below $14,000 (if single, with no qualifying children) all the way up to approximately $48,000 (if married, with 3+ qualifying children).
- American Opportunity Credit – This new tax break provides a credit for educational expenses. You can receive a tax credit of up to $2,500 if you have paid at least $3,000 toward educational expenses during 2010. To qualify, your income must have been less than $90,000 if single, and $160,000 if married.
- Taxes are due by April 18th this year. If you would like more time, you can always file for an extension.
- To file now and to help maximize your refund, take a look at the Free Tax Filing resources in the box above.
- Remember, the sooner you file, the faster you’ll get your refund.
- For more details on specific tax policies, visit IRS.gov.
What Do YOU Think???
- Should unemployed Americans be required to file taxes?
- Got any good tax tips?
- Should the US government help out its own citizens before giving billions to foreign countries?
Please share any of your thoughts by leaving a comment below …