American Rescue Plan Act of 2021 — Nontaxable Unemployment Benefits
(Updated 3/22/21)
The federally enacted American Rescue Plan Act of 2021 includes a retroactive provision making the first $10,200 per taxpayer of 2020 unemployment benefits nontaxable for individuals with an Adjusted Gross Income of less than $150,000.
If you have not filed — You may file your Illinois return once you have filed your federal return. Taxpayers will not be required to add back any of the nontaxed unemployment benefits in computing their Illinois base income.
If you have filed — IDOR is looking at ways to systematically adjust returns that have already been filed. We will issue guidance for taxpayers and tax professionals on the process for obtaining a refund if nontaxed unemployment benefits were included on a previously filed 2020 Illinois tax return. Therefore, taxpayers who received unemployment benefits last year and have already filed their 2020 Illinois tax return should not file an amended return at this time.
The Internal Revenue Service has provided guidance on how to report unemployment benefits and take advantage of the income exclusion on Schedule 1 of the Form 1040. Taxpayers should follow those instructions in computing the federal Adjusted Gross Income that carries over to Line 1 of the Form IL-1040.