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SUBJECT: Taxation of Unemployment Compensation Benefits

EFFECTIVE: January 1, 2010 (RETROACTIVE)

DIGEST OF CHANGES: Reinstates provisions that were in place prior to 2009

REFERENCE: IC 6-3-1-3.5; IC 6-3-2-10

INTRODUCTION

All unemployment compensation benefits are taxable at the federal level. However, a federal adjusted gross income threshold of $12,000 for single taxpayers and $18,000 for married taxpayers determines the taxability of unemployment compensation benefits in Indiana.

CALCULATION OF DEDUCTION FROM FEDERAL ADJUSTED GROSS INCOME

The following worksheet should be used to calculate the Indiana deduction, if qualified.

Enter the amount from Line 7 on the appropriate line of Form IT-40, Form IT-40PNR, or Form IT-40EZ.

If you were married but are filing separately and you lived with your spouse at any time during the year, you must enter 0 on Line 3 of the worksheet. However, if you were married and filing separately and lived apart from your spouse the entire year, you may use the single taxpayer income limitation of $12,000 on Line 3.

____________________________

John Eckart

Commissioner