Do I owe income taxes on the federal and state unemployment insurance benefits I received last year?
There's no tax on the $1,200 federal stimulus payments most Americans received in 2020, or on the $600 stimulus payments mailed early this year. But unemployment insurance is subject to both federal and state income taxes.
You'll receive a Form 1099-G showing the amount you received in unemployment benefits in 2020 and how much (if anything) was withheld for taxes.
For many Americans, the Earned Income Tax Credit (or EITC) will be an important 2020 tax break. The EITC is a refundable credit: It reduces your tax bill dollar for dollar and/or increases your tax refund. But you must have some earned income to qualify for the EITC. (Unemployment benefits don't count as earned income.)
EITC eligibility and the credit amount depend on your adjusted gross income and number of dependents; generally, the smaller your income, the bigger the credit. The 2020 EITC ranges from $538 to $6,660. For example, a single taxpayer or head of household with one child and less than $41,756 of income, or a married couple filing jointly with less than $47,646 of income, can qualify for a maximum credit of $3,584.
Is it true that people with less than $80,000 of income don't have to pay capital gains taxes?
In 2020, the tax rate on a long-term capital gain — your profit on the sale of an asset you've owned for more than one year — is zero percent for married couples filing jointly who have up to $80,000 of taxable income, or single taxpayers with up to $40,000, and for heads of household with up to $53,600.
The bottom line
Don't postpone filing your tax return. Leave yourself time to read the rules carefully and take advantage of every break you're entitled to.
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