Popular state “stimulus” handouts include tax rebates as well as inflation relief payments. In the past year, millions of people in 21 different states got special state payouts.
In the current year, several states are paying out extra rebates and tax refunds.
So, if you’ve gotten or are expecting a special state payment, you may be wondering whether you’ll have to pay tax on it – the IRS has provided an answer.
Update in State Stimulus Checks
The IRS’s clarification on so-called state “stimulus checks” is vital since millions of taxpayers across the United States have received special rebates and payments as states restore surplus revenue to eligible individuals.
According to Kiplinger, these payments differ by state, type, quantity, and eligibility conditions.
- The IRS published guidelines for 2022 state payments last year.
- The government stated at the time that most state stimulus funds were not taxable, but that in some situations, taxpayers could be required to record the payments on their federal taxes.
- If the special state payments were recorded as income, the IRS urged that certain individuals consider updating their 2022 tax returns.
State General Welfare Programs Are Non-taxable
Furthermore, the most recent IRS advice gives details about what the agency refers to as “state general welfare programs,” which are payments made to persons to support the general well-being of people or households in need.
The IRS considers this money to be non-taxable income if it originates from a government fund and is not in exchange for services done.
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Special State Payments Not Include in Income Payments
In accordance with the IRS, taxpayers who get special state payments (one-time refunds, rebates, or other benefits) in 2023 will not be required to include the payments in their income for federal tax purposes in the majority of circumstances.
This is especially true for people who choose the standard deduction on their federal tax filings. (The standard deduction is claimed by the vast majority of taxpayers.)