The Internal Revenue Service said Friday that most taxpayers who received a one-time, state-issued payment last year designed to help with the rising cost of living would not need to report that money as income on their federal tax returns.
Of the 21 states that issued payments, residents of four states may need to claim the money on their returns, the IRS said in a statement.
Last week, the agency told taxpayers to hold off on filing their returns until it looked into the matter and could provide further guidance on how the payments would be dealt with by the agency.
The 21 states that issued state stimulus and rebate checks last year are Alaska, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Maine, Massachusetts, Minnesota, New Jersey, New Mexico, Oregon, Pennsylvania, Rhode Island, South Carolina and Virginia.
Disaster and welfare payments are generally not taxable, and, according to the agency, it determined that payments in 17 states met that definition.
Those states are Alaska, California, Colorado, Connecticut, Delaware, Florida, Hawaii, Idaho, Illinois, Indiana, Maine, New Jersey, New Mexico, New York, Oregon, Pennsylvania and Rhode Island.
In Alaska, dividend payments that are regularly made to residents generally are taxable, but the state’s supplemental energy relief payment will not be.
The agency provided a chart that linked to the state payments that will not be taxable.
In four states – Georgia, Massachusetts, South Carolina and Virginia – state payments do not need to be included in federal income returns if the payment is a refund of state taxes paid and if either the recipient claimed the standard deduction or itemized their deductions but did not receive a tax benefit, the agency said.