Question: I know my unemployment is taxable (got the 1099-G), but what about the stimulus and loans the federal government gave out? My husband got a small one, and we file jointly.
Answer: Now that income tax-filing season is underway, Kokua Line is getting numerous questions about the tax implications of various COVID- 19 relief. We’ll review some of the most common payments, based on information from the state Department of Taxation or the U.S. Internal Revenue Service. A DOTAX update posted at 808ne.ws/covid tax includes an easy-to-read table saying whether certain benefits are generally subject to federal income tax or state income or general excise tax.
>> Economic Impact Payments: Commonly known as “stimulus payments,” these funds are not subject to federal or state income taxes because they are not gross income; they’re tax credits paid in advance. Neither are they subject to Hawaii’s GET. The first round of stimulus, rolled out last spring, topped out at $1,200 per eligible individual or $2,400 per eligible couple filing jointly, plus $500 per qualifying child. The second round, issued from late December through Jan. 15, paid a maximum of $600 per individual or $1,200 per couple filing jointly, plus $600 per qualifying child. Payments phased out above certain incomes. Anyone who did not receive all the EIP for which they were eligible can claim the money as the Rebate Recovery Credit on their 2020 federal income tax return.
>> Unemployment compensation: Under existing law, unemployment compensation is treated as gross income subject to federal and state income tax; it is not subject to GET. This includes unemployment insurance, Pandemic Emergency Unemployment Compensation, Extended Benefits (EB20), Pandemic Unemployment Assistance and the “plus-up” supplements called Federal Pandemic Unemployment Compensation and Lost Wages Assistance. UI claimants were able to withhold federal and state income taxes from their benefits if they chose to; PUA claimants did not have that option.
>> Rental and mortgage relief: Lease and rent payments received by residential and commercial landlords through various COVID-19 relief programs generally subject the landlord or mortgagee to federal and state income taxes and the GE tax; the income was received as in pre-pandemic days, albeit not from the tenants. The aid is considered general assistance to the tenants, and those taxes don’t apply to them.
>> Small-business loans or grants:
>> Loans forgiven under the Paycheck Protection Program are not subject to federal or state income taxes or GE tax.
>> Economic Injury Disaster Loan Emergency Advances (EIDL grants) of up to $10,000, which don’t have to be repaid, are subject to federal and state income taxes but not GE tax.
>> Economic Injury Disaster Loans of up to $2 million are not subject to federal income tax or to state income or GE taxes.
A DOTAX update posted at 808ne.ws/covidtax includes the rationale for various tax treatments, as well as a table saying whether certain benefits are subject to federal or state income tax or state general excise tax.
Q: Any word when the Tax-Aide sites might reopen?
A: No. As we reported last week, Oahu sites that had been scheduled to prepare federal and state income tax returns for seniors abruptly stopped taking appointments. As of Thursday all the sites remained closed.
We just want to send a big mahalo and blessings to the young guys who helped push our truck out of traffic at Ward Avenue and Piikoi Street. — Two kupuna
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