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For taxpayers filing Part-Year Michigan Individual Income Tax Return, MI-1040, how is the tax year 2020 federal unemployment income exclusion allocated on Schedule NR?

Unemployment income is allocated to the state of residence at the time of receipt.  If a taxpayer is a part-year Michigan resident, the federal unemployment income exclusion is prorated over the same period as the unemployment income.

For example, a taxpayer received 10 months of equal unemployment income on benefits of $1,200 beginning March 1, 2020 and received a maximum exclusion of $10,200 on his federal return.  On the federal return, the taxpayer claimed unemployment income of $12,000 and reduced it by $10,200 for a net amount in Adjusted Gross Income (AGI) of $1,800.  On a monthly basis the net amount in AGI is $180 ($1,800/10 months).  The taxpayer moved into Michigan on July 1, 2020.  For March, April, May and June the taxpayer allocates net unemployment income of $720 ($180 x 4 months) outside of Michigan on his Michigan Income Tax Return, Schedule NR.