Accounting for the rest of us

As of mid-March, a record 5.6 million people were receiving unemployment benefits. Those benefits are taxable. However, for those drawing unemployment in 2009, the American Recovery and Reinvestment Act makes the first $2,400 of unemployment benefits exempt from tax.

For married couples, the tax exemption applies separately to each spouse. This means that if both you and your spouse claim unemployment benefits this year, you can exclude the first $2,400 of your unemployment benefits and your spouse can exclude the first $2,400 of his or her unemployment benefits received in 2009.

For unemployment benefits received beyond the first $2,400, which are subject to tax, unemployed workers can opt to have income tax withheld from those benefit payments