$300 weekly unemployment benefits: Extra payments are coming. What to know

March’s $1.9 trillion stimulus bill includes several provisions to help those struggling financially: a third stimulus check for up to $1,400, expanded child tax credits and an extension to the $300 bonus checks for unemployed workers that lasts until Sept. 6. The new bill also includes a $10,200 tax exemption for people who receive unemployment insurance benefits.

Many states have automatically renewed unemployment insurance benefits, but some recipients may have issues when they reach the benefit year ending date (PDF). States limit benefits to one year, and the money is typically cut off after that date. The 2021 American Rescue Plan extends that unemployment insurance, but states require recipients to either file a new claim or request an extension. Because it varies from state to state, those who have been unemployed for at least a year should get in contact with their state’s labor department. 

Check out the IRS guidance for how to use the tax exemption for unemployment insurance when you file your taxes (the deadline to file is May 17). The plan lets tax filers who received benefits exempt the first $10,200 of funds as long as their modified adjusted gross income is less than $150,000. Those who already filed will not have to file an amended tax return. The IRS says it will recalculate and send out tax refunds to those who qualify starting this month, after the exemption is applied. Here’s everything you need to know about how the new package will help people who are unemployed. In addition, here’s what to know about President Joe Biden’s next stimulus plan.

How much money could you get with Biden’s stimulus plan if you’re unemployed?

Biden’s $1.9 trillion COVID-19 relief package extends enhanced unemployment benefits until Sept. 6, with a $300 federal bonus on top of what your state pays. That’s down from the proposed $400 weekly bonus from an earlier version of the bill, and down from the additional $600 per week extended in last year’s CARES Act.

The period between March 14 and Sept. 6 spans 25 weeks. Once payments pick up, that’s $7,500 in federal unemployment insurance that you could count on in addition to your state’s check amount. 

How the $10,200 unemployment tax break will work

The IRS views unemployment insurance as income. In most cases, the state can withhold taxes like a typical paycheck. However, it’s estimated that 10 million unemployment benefit recipients had no taxes withheld, which means they would have a substantial tax bill to pay the following year. To counter that, the new COVID relief package includes a tax exemption of $10,200 for those with an adjusted gross income under $150,000.

The way the exemption works is the first $10,200 of unemployment insurance will not be taxable. If someone received $20,000 of benefits in 2020, they will only be taxed on $9,800 of it.

The IRS gave instructions on how to enter the exemption on tax forms. People who already filed their taxes without the exemption will have their returns recalculated and refund checks will be sent out as early as May.

Some states will also have an unemployment tax exemption on state income taxes, but not all of them. Here are the 13 states not providing a tax break:

• Colorado 
• Georgia 
• Hawaii 
• Idaho
• Kentucky
• Massachusetts 
• Minnesota
• Mississippi
• New York
• North Carolina
• Rhode Island
• South Carolina
• West Virginia

More changes to know about the American Rescue Plan 

States have a limit on how many weeks a person can stay on unemployment. Most provide 26 weeks, with some going as low as 12 weeks and others as high as 30 weeks. Given the length of the pandemic, the federal government extended benefits an additional 24 weeks. Under the new package, benefits will be extended for up to 53 weeks. That should allow those unemployed for most of the pandemic to continue receiving benefits. 

The extension also applies to Pandemic Unemployment Assistance, or PUA, which is for workers who normally don’t receive unemployment insurance. This includes gig workers, freelancers and those who are self-employed. 

Will the $300 weekly unemployment checks be retroactive? 

The unemployment payments do not appear to be retroactive. 

Mixed Earner Unemployment Compensation and qualifications: What to know

The original CARES Act had unemployed workers get their benefits through either state unemployment insurance or through a federal program called PUA. Someone who was self-employed or worked as a gig worker, freelancer or contractor who wouldn’t typically receive unemployment benefits after being laid off could receive PUA instead. 

The December stimulus bill had added additional compensation for someone earning a mixed income from a traditional job and employment as a contractor, who would either receive the unemployment insurance payment or PUA, but not both. That benefit is included in Biden’s American Rescue Plan. With Mixed Earner Unemployment Compensation, a person who made more money from self-employment or a contracting job — with a 1099 form — could receive an extra $100 a week. 

For example, let’s say you made $50,000 in 2019, which was split between $30,000 from a contractor job and $20,000 from a part-time job at a company. If you were laid off, the state unemployment office would calculate whether you’d receive benefits for the $30,000 via PUA or $20,000 via unemployment insurance, but not a combination of the two. 

Though someone who works a traditional job and makes $50,000 a year in New York would receive $480 a week from unemployment insurance, by having a mix of the two you’d get the greater of the two different amounts, which would be the PUA of $288 a week rather than the $280 from unemployment. 

Mixed Earner Unemployment Compensation will now give that person an extra $100, but only if the state participates. It may still be some time before certain states determine whether or not they will participate.

What happens when the payments end on Sept. 6? 

Now that the $1.9 trillion COVID-19 relief package has been signed into law, there will likely not be any discussion of extending benefits until the expiration date nears again in September.

Eligibility rules for unemployment insurance

If you’ve been laid off or furloughed, you’re qualified to apply for unemployment benefits from the state where you live. Once the state approves your claim, you can apply to receive whatever state benefits you’re entitled to. Because states cover 30% to 50% of a person’s wages, there’s no single sum you could expect on a national basis.

Eligibility criteria vary from state to state, but the general rule is that you should apply if you’ve lost your job or been furloughed through no fault of your own. This would include a job lost directly or indirectly because of the pandemic. 

In February, the Department of Labor, as directed by Biden, updated its eligibility requirements to include people who refused to return to work due to unsafe coronavirus standards. Workers qualified for Pandemic Unemployment Assistance when it went into effect. 

How your state calculates unemployment benefit totals

The state determines how much each applicant receives, usually based on an individual’s gross income. It varies from state to state but is typically between $300 and $600, with some exceptions. Mississippi paid up to $235, while Massachusetts’ maximum was $1,220.

How to find your state’s unemployment insurance policy info

Each state’s labor office provides information about its particular unemployment benefits.