The Internal Revenue Service (IRS) recently published the much-awaited federal tax status regarding special payments issued by the government in 2022. Around 21 states issued special payments to their citizens.
The special payment which is known by different names like ‘tax rebates,’ ‘stimulus checks,’ or ‘inflation relief payment’ were distributed among eligible citizens through different programs and schemes.
It should also be noted that some of those stimulus checks, the majority of which comes from the pandemic-related state budget surplus are still being distributed two months into 2023.
According to the IRS, the tax status of the payments issued by the government is described as unique and complex. The agency was in need of time to come to a decision regarding the tax status of the special payments received by the citizens.
In order to arrive at a proper decision, the agency has requested people who received the special payments to wait to file their 2022 federal income taxes. Finally, the IRS stated that the majority of the special payments will not be affected by taxability.
So, if you are a person who has received a ‘tax rebate’ or ‘stimulus payment’ in 2022 and wondering about the taxing status of the payment, here is everything you need to know about the latest update regarding the status.
The States That Provided Stimulus Payments To Their Citizens
According to the detailed report from 2022, at least 22 states in the country provided their citizens with financial assistance under different circumstances and through different schemes. The distribution of these payments took place in the form of child tax credits, income and property tax rebates, and a few through direct relief payments.
According to the reports, the 22 states that gave out financial assistance to their citizens include;
- New Jersey
- New Mexico
- New York
- Rhode Island
- South Carolina
Among the 22 states that gave out financial support to their citizens, the state of Alaska gave out the largest payment. The state provided their eligible citizens with a total sum of $3,124 in 2022.
While Alaska gave out the highest amount, the state of California gave out the most payment. The state sent out almost 31,650,000 Middle-Class Tax refunds in 2022.
What Is The Tax Status Of Your Stimulus Payment?
In one of their recent statements, the IRS made it clear that the agency won’t be challenging the taxing status of some of the payments made by the state to their citizens.
In light of this statement, people who have received their stimulus checks related to activities like general welfare and disaster relief are completely free from any kingdom tax liability as they are free of any tax challenges from the IRS.
After considering the payments made by the reported 22 states, the IRS made it clear that the payments provided by states like California, Colorado, Connecticut, Delaware, Florida, Hawaii, Idaho, Illinois, Indiana, Maine, New Jersey, New Mexico, New York, Oregon, Pennsylvania, and Rhode Island will not be taxable as the money was distributed by the government under the label of general welfare and disaster relief.
So, if you are a resident of any of the 16 states mentioned above, and have received a stimulus check, there is no reason for you to be worried about the taxing status of the payment.
While residents of these 16 states are excluded from the policy, it should also be noted that the rule is also applicable for a portion of the payment given out by the state government of Alaska.
While the state gave out around $3,124 to eligible citizens, around $662 from the total amount was given out under the label of general welfare or disaster relief, which makes that share of money also fall under the above-mentioned ‘tax immune’ category.
The remaining amount from the total payment, which is around $2462, is taxable as federal income.
Residents Who Need To Pay Taxes On Their 2022 Stimulus Check
While there is a clear declaration about who does not need to pay taxes on their 2022 stimulus check, residents of some of the states like Georgia, Massachusetts, South Carolina, and Virginia are expected to pay taxes on their stimulus checks.
If you are a resident of any of the mentioned states, then make sure that you read the following part, which explains the case of the taxpayers from these states in detail.
If you are a resident of any of the four states – Georgia, Massachusetts, South Carolina, or Virginia – and have itemized any deductions in 2022 and have already received a tax benefit on that deduction, then the stimulus check received by you from the state government in 2022 is taxable.
The tax rebate distributed by the four above-mentioned states was for state-paid taxes. So, if you are a person who took the standard deduction in 2022 but did not receive any tax benefit from the state, then such tax rebates or relief will not be considered taxable in the new update.
While the IRS mentioned the situation of almost all the 22 states that gave out stimulus checks in 2022, there was no clear mention of the case in Minnesota. The state of Minnesota provided its frontline healthcare workers with an additional payment in 2022.
While the IRS has not mentioned anything specific for the state or the payment to the frontline health workers, the Minnesota Department of Revenue, the payments received by the workers are federally taxable.
The department also made it clear that workers who received the special payment should include the details of the payment on line 8 of Form 1040.
Sometimes the rules and conditions regarding taxes and refunds from the IRS can be confusing, and it is only natural that you are unsure about the stimulus check that you received in 2022. If you are confused, it is always advised to consult a professional before filing your tax returns to avoid confusion in the future.
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