Tax refund check Plus 1040 form and hundred dollar bill.
The IRS has announced that the special payments made by 21 states in 2022 are not taxable and do not need to be reported on their 2022 taxes. It means that people in the following states do not need to report these state payments on their 2022 tax return. 2022: California, Colorado, Connecticut, Delaware, Florida, Hawaii, Idaho, Illinois, Indiana, Maine, New Jersey, New Mexico, New York, Oregon, Pennsylvania, and Rhode Island. Alaska is also in this group, but see below for more nuanced information.
Also, many people in Georgia, Massachusetts, South Carolina, and Virginia will also not include state payments in income for federal tax purposes if they meet certain requirements. For these individuals, state payments will not be included for federal tax purposes if the payment is a refund of state taxes paid. and the beneficiary claimed the standard deduction or itemized deductions but did not receive a tax benefit.
The IRS is aware of questions regarding refunds or excise tax payments made by certain states related to the pandemic and its associated consequences in 2022. A variety of state programs distributed these payments in 2022, and the rules governing their treatment for such purposes. federal income tax are complex. While payments made by states can generally be included in income for federal tax purposes, there are exceptions that would apply to many of the payments made by states in 2022. To help taxpayers who have received these payments to file your returns in a timely manner, the The IRS provides the additional information below.
Refund of state taxes paid
If the payment is a refund of state taxes paid and the payee claimed the standard deduction or itemized deductions but did not receive a tax benefit (for example, because the $10,000 tax deduction limit applied), the payment is not included in income for federal taxes. tax effects.
Payments from the following states in 2022 fall into this category and will be excluded from income for federal tax purposes, unless the beneficiary received a tax benefit in the year in which taxes were deducted.
- Georgia
- Massachusetts
- South Carolina
- Virginia
General welfare and disaster relief payments
If a payment is made for the promotion of general welfare or as a disaster relief payment, for example, in connection with the outgoing pandemic, it may be excludable from income for federal tax purposes under the Welfare Doctrine General or as a Qualified Disaster Relief Payment. Determining whether payments qualify for these exceptions is a complex, fact-intensive investigation that depends on a number of considerations.
The IRS has reviewed the types of payments made by various states in 2022 that may fall into these categories and, given the complicated fact-specific nature of determining the treatment of these payments for federal tax purposes, is balanced against the need to provide certainty and clarity to people. who are now attempting to file their federal income tax returns, the IRS has determined that it is in the best interest of sound tax management and given that the pandemic emergency declaration ends in May 2023, making this an issue only for tax year 2022, if a taxpayer does not include the amount of one of these payments in their 2022 income for federal income tax purposes, the IRS will not challenge the treatment of the 2022 payment as excludable from income on a return original or amended.
Payments from the following states fall into this category and the IRS will not challenge the treatment of these payments as excludable for federal income tax purposes in 2022.
- Alaska
- California
- Colorado
- Connecticut
- Delaware
- Florida
- Hawaii
- Idaho
- Illinois
- Indiana
- Maine
- New Jersey
- New Mexico
- NY
- Oregon
- Pennsylvania
- Rhode Island
For a list of the specific payments to which it applies, see this graph.
Other payments
Other payments that may have been made by states can generally be included in income for federal income tax purposes. This includes the annual Alaska Permanent Fund Dividend payment and any state payments provided as workers’ compensation.
