The IRS has issued guidance on state tax payments, and it could have a big impact on many taxpayers in the United States. According to the announcement, many of the state rebates received in 2022 for general welfare and disaster relief are not federally taxable. This means that you likely do not need to report these state payments on your 2022 federal tax return.
The states included in this guidance are Alaska, California, Colorado, Connecticut, Delaware, Florida, Hawaii, Idaho, Illinois, Indiana, Maine, New Jersey, New Mexico, New York, Oregon, Pennsylvania, and Rhode Island.
However, it’s worth noting that residents of Georgia, Massachusetts, South Carolina, and Virginia may also be impacted by this guidance, but only under specific circumstances. If you’re a resident of one of these four states, you may not need to include state payments on your federal tax returns if you meet these requirements:
- The payment is a refund of state taxes paid, and
- The recipient claimed the standard deduction or itemized their deductions but did not receive a tax benefit
This means that if you received a refund of state taxes paid and did not receive a tax benefit when itemizing your deductions or claiming the standard deduction, you may be exempt from reporting the payment on your federal tax return.
It’s important to note that this guidance only applies to state payments received for general welfare and disaster relief. If you received a state payment for any other reason, it will likely still be subject to federal taxation.
The IRS has provided a chart detailing the specific payments to which this guidance applies, which can be found on their website. If you’re unsure whether or not your state payment qualifies for this exemption, it’s worth taking a look at the chart to determine if you need to report the payment on your federal tax return.
This guidance from the IRS is welcome news for many taxpayers who may have received state payments in 2022. Not having to report these payments on their federal tax returns will make the process of filing taxes much easier and less time-consuming.
It’s also worth noting that this guidance could have an impact on state tax returns as well. Some states may choose to follow the IRS’s lead and exempt these payments from state taxation as well, but it’s important to check with your state’s tax authority to determine if this is the case.
In conclusion, if you received a state payment for general welfare or disaster relief in 2022, you may not need to report it on your federal tax return. This guidance from the IRS could have a big impact on many taxpayers, particularly those who live in one of the 17 states listed above. Be sure to consult the IRS’s chart or speak with a tax professional to determine whether or not your payment qualifies for this exemption.
