State Stimulus & Taxes: Is Your Inflation Relief Check Taxable?
Some states have issued stimulus relief checks, such as California’s Middle Class Tax Refund (MCTR) payment. But whether these are taxable or not is unclear and is creating a lot of confusion, according to experts.
See: Didn’t Get Your State Stimulus Check? Here’s Who To Contact for Information
Find: 3 Ways Smart People Save Money When Filing Their Taxes
MTCR payments, for example, have been sent out to Californians and range from $200 to $1,050. While these are not taxable for California state income tax purposes and you do not need to claim the payment as income on your California income tax return, according to the State of California Franchise Tax Board, they “may be considered federal income.” Individuals who received an MCTR of $600 or more will receive a 1099-MISC for this payment, it added.
“You should consult IRS Publication 525, Taxable and Nontaxable Income, or your tax professional regarding the federal tax treatment of these payments,” according to the Franchise Tax Board.
The San Francisco Chronicle reports that while the Internal Revenue Service (IRS) still has not issued any guidance on whether this refund is taxable on federal returns, some major tax-preparation companies are treating it as not taxable.
“Based on currently available information, and our own expertise, our understanding is that these payments are not taxable at the federal or California state level,” Lisa Greene-Lewis, a spokeswoman for TurboTax, told The San Francisco Chronicle “We are providing guidance to our customers and are hopeful for additional clarification in the near future.”
According to the IRS, taxpayers generally receive a 1099-G reporting the state tax refund.
“Whether or not your state income tax refund is taxable on your federal income tax return depends on whether you took an itemized deduction for the tax that was later refunded,” the IRS says on its website. “Don’t report any of the refund as income if you didn’t itemize your deductions on your federal tax return for the tax year that generated the refund.”
That’s why, as The San Francisco Chronicle noted, the Tax Franchise Board “surprised tax pros in November when it said it would send a different form — 1099-MISC for miscellaneous income — to anyone who received a payment of $600 or more because it “may be taxable income for federal purposes.”
Tax attorney Adam Brewer told KTLA that the relief payment “is indeed taxable when it comes to the federal return, and warns that the $600 number is not a threshold for who has to report the income.”
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Beyond California, 17 states issued inflation relief payments in 2022, including Colorado, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Maine, Massachusetts, New Jersey, New Mexico, New York, Pennsylvania, South Carolina and Virginia, as GOBankingRates previously reported. Payment amounts ranged from $50 to $1,050 for individuals, depending on the state and income level of the recipient.
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This article originally appeared on GOBankingRates.com: State Stimulus & Taxes: Is Your Inflation Relief Check Taxable?
