Unemployment Compensation Instructions

If you received unemployment benefits in 2020, you may be eligible to claim an exemption from both Maine and federal income tax. If you have an annual income of less than $150,000, regardless of filing status, recently enacted legislation exempts up to $10,200 in unemployment benefits from both federal and state income tax for tax year 2020.

For information on filing your federal return, see www.irs.gov.

To claim the State exemption, follow these updated instructions for filing your 2020 Maine individual income tax return:

If you have NOT filed your

2020 Maine individual income tax return:

  

If you HAVE already filed your

2020 Maine individual income tax return:
  1. First, complete your federal individual income tax return (Form 1040 or Form 1040-SR), including Schedule 1. You will report any unemployment compensation and other income details on federal Schedule 1, lines 7 and 8. See www.irs.gov.
     
  2. Next, complete your Maine individual income tax return (Form1040ME).
     
  3. On Form 1040ME, line 14, enter your federal adjusted gross income from line 11 of the federal return (Form 1040 or Form 1040-SR). 
     
  4. If you are eligible to claim the Property Tax Fairness Credit and/or the Sales Tax Fairness Credit (line 25d and/or line 25e), follow these instructions for completing Schedule PTFC/STFC:
  • If you complete lines 1a through 1e, include on line 1e the total unemployment compensation you and your spouse, if applicable, received during the year.
  • If you complete lines 2a through 2d, add the total income (from federal Form 1040 or Form 1040-SR, line 9) plus the unemployment compensation (from federal Form 1040 or Form 1040-SR, Schedule 1, line 8) and enter on line 2a.
  
  1. Your federal return was *likely* automatically adjusted by the Internal Revenue Service for the excludable amount of unemployment compensation. Contact the IRS to obtain your updated “federal adjusted gross income amount.”
     
  2. You must file an amended Maine individual income tax return (Form1040ME).
  • Check the box above your social security number on the form to indicate this is an amended return.
  • Fill out this return as you did your previous Maine return except that the number you enter on line 14 will be the updated “federal adjusted gross income amount” that you obtained from the IRS.
  • Follow the Form’s instructions to complete the remainder of the return; please note that the instructions for Schedule PTFC/STFC have been updated.