SC lawmakers voted to waive taxes on some unemployment income. Here’s what that means
People who received unemployment benefits last year have some good news.
Lawmakers on Thursday voted not to tax the first $10,200 of unemployment benefits individuals received last year, for people who had less than $150,000 in federal adjusted gross income.
The legislation, which passed the Legislature days before the May 17 filing deadline, conforms with a federal law where the IRS is not taxing the first $10,200 of unemployment income received in 2020. The provision was added as part of the American Rescue Plan signed by President Joe Biden in March.
The legislation now goes to the governor, who is expected to sign it into law, his office said.
To make it simpler for filers, South Carolina is preparing to conform with the federal tax law measure.
“We certainly do not want to tax those who were without work and drawing that,” said House Majority Leader Gary Simrill, R-York.
As part of the legislation, lawmakers plan to use $61.3 million of American Rescue Plan money to cover the shortfall created by conforming to the federal tax rule.
As of May 11, more than 2 million returns have been filed with the S.C. Department of Revenue. Last year, about 2.5 million returns were filed with the state.
DOR did not immediately comment on how it would handle people who have already filed their returns for 2020. But the agency will release guidance on how it would retroactively handle taxes on unemployment benefits when it has more information.
Passage of the legislation would be welcomed news for those who received unemployment benefits during the pandemic.
As the pandemic caused the economy to slow down and a spike in the unemployment rate, many people filed for claims for assistance. The federal government also assisted in providing expanded benefits for those unemployed during the pandemic.
Last week Gov. Henry McMaster said South Carolina on June 30 would withdraw from expanded federal unemployment benefits in an effort to fill more than 81,000 vacant jobs in the state. State unemployment benefits would continue for those who can’t find suitable work.
This story was originally published May 14, 2021 at 2:22 PM.
