Unemployment Compensation Is Not Tax Exempt for the 2011-12 FAFSA

A tax benefit for unemployment compensation has expired so unemployment income should no longer be reflected as untaxed income on the 2011-12 FAFSA.

The expiration of this benefit in 2010 means that no unemployment income should be reported as untaxed income on the 2011-12 FAFSA. In 2009, the first $2,400 of unemployment compensation was considered untaxed income on the 2010-11 FAFSA. Now the entire amount of unemployment income is reported as taxable income and is included in the Adjusted Gross Income (AGI) on the 2011-12 FAFSA.

Congress failed to extend this tax benefit when it passed a tax package at the end of 2010. The department has updated the paper and online FAFSA, but early versions of the 2011-12 paper-FAFSA did not reflect this change because of the last-minute Congressional action on the tax package. We are unaware of written official guidance on this subject, but we have confirmed this guidance with the U.S. Department of Education.


Publication Date: 3/3/2011

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