How will collecting unemployment affect my tax return and EIC?

I’m in the PA and recently been collecting unemployment. I’m concerned about my tax return. Can anyone give me some facts about PA tax info?
I usually get a decent tax return. I guess basically what I want to know is how much that will change. I worked all year up to May. So my income will be half of what is what last year, not including the unemployment.

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6 Responses to “How will collecting unemployment affect my tax return and EIC?”

  • v b:

    1. For federal, the first $2400 of Unemployment will not be taxed.
    2. I haven’t seen the worksheets for next year’s EIC and can’t tell if the $2400 will be part of your MAGI for calculating EIC or not.

    EIC is based on earned income, but is reduced if you have a high AGI.

  • travelguruette:

    EIC is earned income. Your income before unemployment will count. It is federal and has nothing to do with PA.

  • 123456789:

    For 2009 only, unemployment is tax-free only for the first $2,400; the remaining portion over the $2,400 you receive in 2009 would be taxable.

    As for EIC, it is based on earned income so if you have been collecting unemployment benefits all year and have not had any earned income, such as wages, you would not be eligible for EIC.

  • ninasgramma:

    The EIC is figured based on your earned income such as wages. It is then refigured on your adjusted gross income, which will include unemployment compensation which is taxed at the federal level (for 2009 the first $2,400 is exempt). You will receive whichever amount is smaller. So the additional income from unemployment may lower your Earned Income Credit.

    Pennsylvania does not tax unemployment compensation.

  • Judy:

    You won’t pay state tax on the unemployment comp.

    But EIC, which is federal and has nothing to do with PA, is EARNED income credit, so you only get EIC based on income from a job, not for unemployment. And unemployment comp is taxable at the federal level, this year except for the first $2400.

  • Maria H:

    Hi there the EIC is Federal not state so it does not have to do with PA the State you live in. Like the people posted here unemployment is tax exempt for the first $2500 bucks so maybe you will need to pay taxes on the unemployment money you received after $2500 if more than this amount was collected. I am not quite sure it would be best if you call the IRS at 1-800-829-1040 they should be able to help.
    For the future you can try this is an online tax Service i’ve used and they are helpful at answering my question, Good Luck :-)

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