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Unemployment Exclusion Adjustments

The Department has completed all unemployment insurance (UI) benefit adjustments on 2020 Vermont income tax returns. If you believe you qualify and did not receive an adjustment, please consider amending your 2020 Vermont return to claim the UI exclusion. Learn more about amending your return.

Vermont Department of Taxes to adjust most qualifying personal income tax returns and issue refunds for 2020 unemployment exclusion

The American Rescue Plan Act (ARPA), signed into federal law on March 11, 2021, included a retroactive personal income tax provision for tax year 2020. The provision excluded from taxation the first $10,200 of an individual’s unemployment insurance benefits, so long as the modified adjusted gross income (AGI) reported on the tax return is less than $150,000 in 2020. Read more from the Internal Revenue Service (IRS) about this new federal exclusion.

This unemployment exclusion also applies to Vermont personal income taxes filed for tax year 2020. Because the exclusion was enacted after the filing season had opened, many Vermonters with unemployment benefits had already filed their state personal income tax return before the exclusion was available.

To help these Vermonters get refunds from this exclusion, the Vermont Department of Taxes will begin recalculating 2020 Vermont personal income tax returns and will issue refunds to qualified taxpayers who filed electronically before April 1, 2021. Taxpayers who receive an automatic adjustment will also receive a letter summarizing the adjustment made.

Vermont taxpayers who already filed and took the unemployment exclusion on their federal taxes do not need to take any further action to claim the exclusion in Vermont. Because of the way income is reported on a Vermont personal income tax return, a taxpayer who claimed the exclusion on their federal tax return will already have the exclusion applied to their Vermont tax return as well.

Please review this guidance and the associated frequently asked questions to understand if you are eligible for an automatic adjustment related to the unemployment exclusion.

Please also see our press release on this topic, Vermont Department of Taxes Issues Refunds to Unemployment Benefit Recipients.

Frequently Asked Questions