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Tax Tips: New rule could mean more money in your pocket

Millions of Americans who received unemployment in 2020 will be eligible for a tax break, even if they've already filed

CLEVELAND — It's not quite the same as winning the lottery, but for for the unemployed the American Rescue Plan is a serious payday. 

"If you received unemployment in 2020, the first $10,200 of unemployment is not taxable if your adjusted gross income is below $150,000," said Bryan Bibbo, financial expert with JL Smith Group.

That's about 94 percent of Ohioans, and tens of millions of Americans overall.

"It's a godsend," said Angela Retamoza. "It's hard to have stress every time there's a bill and they have to vote because you're sitting there and praying they'll make things right. "

RELATED: Stimulus checks and child tax credits: IRS may need your 2020 tax return

If you already filed your return, and didn't account for the tax break, no worries. The IRS says it will automatically send refund checks starting in May. For those who haven't filed, tax prep software have been updated. 

Bibbo says the tax break could save those who qualify, "anywhere from 15 to 25 percent plus. So it's a big savings"

And that savings can be a lifesaver for families like those in the restaurant business, who were sidelined for most of the year. 

"I don't think people understood the gravity of what it was really going to be like being on unemployment for an entire year," said Rachel, whose husband owed thousands in unemployment taxes. 

Now, with their taxable income reduced, they and others who collected benefits in 2020 could be eligible for additional breaks, including the earned income tax credit, education credits, even childcare of dependents credit.

Although if you already filed your taxes, you'll need to file an amended return to get them.

"We owe about $2,800," Rachel said. "Which might not seem like a lot but after a year of really not being able to save, this actually is quite a shock."

RELATED: Third stimulus check: More 'plus-up' and veterans payments have arrived

And another shock for people who took a hit in 2020 — if you didn't get a stimulus check because you made too much the year before, you can now file to get that money.

"That's a huge opportunity for a lot of people," Bibbo said. "And we saw it across the board with individuals, whether they were unemployed, they were laid off for a time, [or] their income went down, they were able to get those stimulus checks."

All of these changes apply just to your federal tax returns. If you want to reduce your state tax bill, you'll need to file an amended return to show your adjusted gross income decreased.

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Editors Note: The video in the player below is from a previously aired story

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