Certain states do not tax unemployment benefits or have already made modifications to their forms and instructions to exclude unemployment for tax year 2020, so nothing will change for these in terms of the total taxable unemployment to the state:
- New Jersey
A few states have provided guidance indicating that they will follow the federal law change and allow the unemployment exclusion:
Two states have affirmatively stated that they will not allow the exclusion, and have issued guidance on how to report the difference for state purposes:
- Colorado (https://tax.colorado.gov/press-release/colorado-provides-guidance-on-american-rescue-plan-related-to-taxable-ui-benefits)
- Wisconsin (https://www.revenue.wi.gov/Pages/TaxPro/2021/news-2021-ARP-Impact.aspx)
If your state is not listed here, you may be under-reporting income to the state by using federal AGI with the unemployment benefits excluded. Please continue to check with the states for the latest information and use extra caution when completing part-year or nonresident returns.