Inflation Relief Checks: Is Your State’s One-Time Payment Taxable?
Written by
Yaël Bizouati-Kennedy
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The Internal Revenue Service (IRS) issued guidance regarding the federal tax status involving special payments made by 21 states in 2022, determining that taxpayers in many states will not need to report these payments on their 2022 tax returns.
Taxpayers who received stimulus checks in the following states do not need to report these state payments on their 2022 tax return: California, Colorado, Connecticut, Delaware, Florida, Hawaii, Idaho, Illinois, Indiana, Maine, New Jersey, New Mexico, New York, Oregon, Pennsylvania and Rhode Island.
The full list of exempted relief checks can be found on the IRS website here.
What About Paid State Taxes?
In Georgia, Massachusetts, South Carolina and Virginia residents who did not receive a tax benefit from a state tax refund whether they claimed the standard deduction or itemized deductions the payment is not included as income.
But before not adding the refund, “you should consult IRS Publication 525, Taxable and Nontaxable Income, or your tax professional regarding the federal tax treatment of these payments,” according to the Franchise Tax Board.
There Could be Additional Filing Challenges for Californians
California residents who received more than $600 for their “Middle Class Tax Refund” already received a 1099-MISC form, which means if the state does not amend and reissue the forms, there will be a mismatch that could trigger a delay in refunds or require filers to contact the IRS to remedy the situation.
Will I Receive a Tax Document?
According to the IRS, taxpayers generally receive a 1099-G for a state tax refund.
“Whether or not your state income tax refund is taxable on your federal income tax return depends on whether you took an itemized deduction for the tax that was later refunded,” the IRS says on its website. “Don’t report any of the refund as income if you didn’t itemize your deductions on your federal tax return for the tax year that generated the refund.”
Seventeen states issued inflation relief payments in 2022, including Colorado, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Maine, Massachusetts, New Jersey, New Mexico, New York, Pennsylvania, South Carolina and Virginia, as GOBankingRates previously reported. Payment amounts ranged from $50 to $1,050 for individuals, depending on the state and income level of the recipient.
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