Durbin, Axne Announce Their Provision to Provide Tax Relief for Unemployed Americans Included in American Rescue Plan

Durbin, Axne authored provision removes taxes on up to $10,200 in unemployment aid for 2020 tax filing

WASHINGTON – Today, U.S. Senate Majority Whip Dick Durbin (D-IL) and U.S. Representative Cindy Axne (D-IA-03) announced that a provision to provide tax relief for Americans who lost their jobs and utilized unemployment benefits last year will be included in the American Rescue Plan. The provision, based on Durbin’s and Axne’s Coronavirus Unemployment Benefits Tax Relief Act, would waive federal income taxes on the first $10,200 of unemployment benefits received in 2020 for households earning less than $150,000. The tax relief would extend to both workers who received benefits through federal unemployment programs like Pandemic Unemployment Assistance (PUA) and Pandemic Emergency Unemployment Compensation (PEUC) as well as those who received traditional benefits through their state unemployment insurance fund.  

“The inclusion of our provision is welcome news to the millions of Americans using unemployment benefits to keep a roof over their head, put food on the table, and pay for health care and other necessities. I’m pleased that the Senate passed this measure I worked on with Rep. Axne, which allows Illinoisans to focus their UI benefits on covering essentials during the pandemic,” Durbin said. 

“This is fantastic news for the millions of Americans and thousands of Iowans who faced a surprise tax bill on the unemployment benefits they utilized last year to keep a roof over their heads and food on their table,” said Rep. Axne. “This commonsense fix that Senator Durbin and I introduced last month will protect families, promote economic stability, and ensure that the additional benefits that we provided through the CARES Act last year stay in the pockets of those in need instead of on their tax bills.”

The CARES Act, passed by Congress in March 2020, provided an additional $600 in unemployment benefits through the end of July. The $10,200 of tax relief provided in this bill would cover 17 weeks of that $600 per week benefit.  This amounts to as much as $1,020 in tax forgiveness for unemployment claimants, assuming a 10 percent tax rate.

This provision is based on similar tax relief that was provided in the 2009 American Recovery and Reinvestment Act (ARRA). ARRA included up to $2,400 in tax relief to cover unemployment benefits that were provided during the last recession.

The U.S. Department of Labor estimates that more than 18 million Americans are still receiving some form of unemployment benefits.