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Democrats unveiled a bill this week aimed at providing tax relief for the millions of Americans collecting unemployment benefits last year — and who could face a surprise tax bill this spring.
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Sen. Dick Durbin, D-Ill., and Rep. Cindy Axne, D-Iowa, introduced a bill on Tuesday that would waive taxes on the first $10,200 in unemployment benefits that individuals received last year. Americans who received jobless aid through state and federal programs would qualify for the relief, the lawmakers said in a news release.
MILLIONS OF AMERICANS RECEIVING UNEMPLOYMENT AID COULD FACE SURPRISE TAX BILL
"Families across the country are struggling to keep a roof over their head, food on the table, and to pay for health care and other necessities," Durbin, the No. 2 Senate Democrat, said. "As we grapple with the economic pain of this pandemic, the bill I’m introducing today with Rep. Axne would provide tax relief to unemployed Americans so they can spend their benefits supporting their families and their communities."
Unlike the two stimulus checks delivered as part of a broader coronavirus relief measure, unemployment benefits are taxable at the federal level and by most states (California, New Jersey, Oregon, Pennsylvania and Virginia are the only ones to completely exempt it), meaning recipients could wind up with a tax bill next year, even though they lost their job. You do not have to pay Social Security and Medicare taxes on your unemployment benefits.