The IRS has decided which of the state tax refunds or stimulus payments that more than 50 million Americans got in 2022 are subject to federal income tax. The IRS advised on February 3 that people who received “special tax rebates or payments” from their state governments should hold off on submitting their 2022 returns until more information is available. A week later, the organization gave that clarification, stating that many states’ taxpayers “will not need to disclose these payments.”
Stimulus Check
2022 saw no federal stimulus checks, but at least 22 states offered money back to citizens, mainly in the form of direct relief payments, child tax credits, and rebates on income and property taxes. The IRS has decided to waive its requirement that taxpayers report funds used for “general welfare & disaster assistance,” which includes payments associated with the COVID-19 pandemic.
Which States’ Residents Are Not Obligated to Pay Taxes?
It stated that residents who got payments from the following states California, Colorado, Florida, Connecticut, Delaware, Hawaii, Idaho, Maine, New Jersey, New Mexico, Illinois, Indiana, Pennsylvania, New York, Oregon, and Rhode Island would not be required to pay taxes on those sums. The $662 from an energy relief payment, which made up a part of Alaska’s payment, is also covered by that ruling. Alaska’s remaining contribution is subject to federal income tax.
Georgia, Massachusetts, South Carolina, and Virginia residents who itemized deductions in 2022 and got a tax benefit from those deductions must pay federal income taxes on their state rebates. If a taxpayer accepted the tax deduction in 2022 or did not get a tax gain from state taxes (i.e., they reached the $10,000 maximum), those state rebates or relief payments would not be taxable because they were for state taxes paid.
Minnesota, which paid a bonus to frontline healthcare employees in 2022, was not mentioned by the IRS. Nevertheless, the payment is nationally taxable, as per the Minnesota Department of Revenue, and you must report it on line 8 of Form 1040 reports CNET.
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