Tax Exemption for Unemployment Benefits in 2009
Under the American Recovery and Reinvestment Act (ARRA), the first $2,400 of unemployment benefits an individual receives in 2009 are tax free. This provision applies only to benefits received in 2009: Normally, unemployment benefits are taxable.
Individuals who receive unemployment benefits this year should check their withholding to ensure they are not having unnecessary tax withheld. IRS News Release 2009-29 has more detail on this provision.