Revenue Publishes Informational Bulletin on Taxation of Unemployment Benefits

SUBJECT: Taxation of Unemployment Compensation Benefits

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.

	1. Net unemployment compensation received in the tax year
	2. Federal adjusted gross income including net unemployment compensation
	3. Enter $12,000 if single or $18,000 if married filing jointly
	4. Subtract line 3 from line 2. If zero or less, enter zero.
	5. Enter 50% of the amount on Line 4
	6. Taxable unemployment compensation for Indiana purposes:
	enter the amount from Line 1 or Line 5, whichever is smaller
	7. Subtract Line 6 from Line 1.

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.

http://www.in.gov/legislative/iac/20120530-IR-045120252NRA.xml.html