For taxpayers filing Part-Year Michigan Individual Income Tax Return, MI-1040, how is the 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.