IRS says California, most state tax rebates aren’t considered taxable income

Taxpayers in additional than 20 states who acquired tax rebates final yr received some steering from the IRS after the company had requested them to carry off on submitting their tax returns. At concern was whether or not the IRS would think about these funds to be taxable earnings.

The IRS on Friday stated that taxpayers in “many states” will not have to report the funds on their 2022 tax returns, that are due by April 18 this yr. 

California and greater than 20 different states licensed tax rebates final yr as their coffers have been buoyed by sturdy financial development and federal pandemic support, with the aim of serving to their residents offset inflation and the prices of the pandemic. However on February 3, the IRS requested individuals who had acquired a rebate to wait earlier than submitting their taxes, citing the query of whether or not the checks wanted to be reported as earnings.

On Friday, the IRS stated that, for essentially the most half, taxpayers will not should report the rebates on their tax returns. 

“Throughout a assessment, the IRS decided it won’t problem the taxability of funds associated to normal welfare and catastrophe aid,” it famous.

The states the place residents who acquired rebates and will not have to report them as earnings are:

• Alaska (however just for the supplemental Power Aid Fee acquired; the annual Everlasting Fund Dividend is often taxable on the federal stage.)
• California
• Colorado
• Connecticut
• Delaware
• Florida
• Hawaii
• Idaho
• Illinois
• Indiana
• Maine 
• New Jersey
• New Mexico
• New York
• Oregon
• Pennsylvania 
• Rhode Island

The IRS added that many individuals within the following states will not should report their rebate checks as earnings in the event that they meet some necessities. For example, that is the case if the rebate is a refund of state taxes paid and the taxpayer claimed the usual deduction or itemized deductions however didn’t obtain a tax profit, the IRS stated. These states embrace:

• Georgia
• Massachusetts
• South Carolina
• Virginia