The Internal Revenue Service has determined taxpayers will not need to report special payments made by 21 states on their 2022 tax returns. The initial IRS statement on the issue this month had left many confused.The IRS now says it will not challenge the taxability of payments related to general welfare and disaster relief. Those include the following; California, Colorado, Connecticut, Delaware, Florida, Hawaii, Idaho, Illinois, Indiana, Maine, New Jersey, New Mexico, New York, Oregon, Pennsylvania and Rhode Island
.This means 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 included except the annual payment of Alaska's Permanent Fund Dividend is considered income.
Many in Georgia, Massachusetts, South Carolina and Virginia also will report state payments as income if they meet certain requirements. Refunds of state taxes in Georgia, Massachusetts, South Carolina and Virginia do not need to be reported it they meet the following qualification: either recipients claimed the standard deduction or itemized deductions but did not receive a tax benefit (for example, because the $10,000 tax deduction limit)
Payments for promotion of the general welfare or as a disaster relief payment, for example –pandemic-related, it may be excludable from income General Welfare Doctrine or as a Qualified Disaster Relief Payment. The IRS says determining these exceptions requires “a complex fact intensive inquiry.”
State payments fall into this category in Alaska California, Colorado, Connecticut, Delaware, Florida, Hawaii, Idaho, Illinois, Indiana, Maine, New Jersey, New Mexico, New York, Oregon, Pennsylvania and Rhode Island.
