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How should part-year residents of Michigan allocate the federal 2020 Unemployment Compensation Exclusion on the 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 2020 Unemployment Compensation Exclusion is prorated at the same rate as the unemployment income.
Prorated unemployment calculation:
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 10, 2020. For March, April, May, and June the taxpayer allocates net unemployment income of $720 ($180 x 4 months). The first nine days of July would be allocated to the other state (9 days/31 days in July x $180 = $52). The combined total ($720 + $52 = $772) would be allocated outside of Michigan on his Michigan Income Tax Return, Schedule NR.