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Published by Jake Leahy

IRS Releases Guidance Relating to Certain State Refund and Relief Payments

IRS Provides Information to Explain Refund of State Taxes Paid, General Welfare and Disaster Relief Payments, and Other Payments.
Kelly Sikkema, Unsplash
February 12, 2023

The Internal Revenue service issued guidance Friday that answers lurking questions about whether payments issued by 21 state governments will be considered taxable income.

The guidance largely breaks down to whether the payments were simply a rebate of state and local taxes paid, or if it was general welfare and disaster relief. The guidance states that “people 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 . . . Alaska is in this group as well, but please see below for more nuanced information.”

Certain taxpayers will be subject to payments received from Georgia, Massachusetts, South Carolina, and Virginia, namely taxpayers who received a tax benefit from the deduction previously.

The 17 states with general welfare and disaster relief payments (including Illinois) the IRS states that the IRS ‘will not challenge” a taxpayer who excludes this as income in an amended or original return.

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