IRS says California, most state tax rebates aren't considered taxable income (2024)

FAQs

IRS says California, most state tax rebates aren't considered taxable income? ›

IRS says California, most state tax rebates aren't considered taxable income. Taxpayers in more than 20 states who received tax rebates last year got some guidance from the IRS after the agency had asked them to hold off on filing their tax returns.

You do not need to claim the payment as income on your California income tax return.

Both rulings highlight a fundamental principle: rebates that effectively reduce the purchase price of a product or service are not to be treated as taxable income. For taxpayers, this means that such rebates lower the out-of-pocket costs for certain purchases without increasing their tax liabilities.

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.

Disability and worker's compensation payments are generally nontaxable. Supplemental Security Income payments are also tax-exempt. Disability compensation or pension payments from the Department of Veterans Affairs to U.S. military Veterans are tax-free as well.

California excludes unemployment from taxable income. Do not enter lottery winnings from other states. If you entered IRS deferred foreign income on your federal return you may subtract that amount on the California return. California does not conform to federal law regarding the disallowance of excess business loss.

Stimulus payment and taxable income

The GSS I and GSS II are not taxable for California state income taxes. You will not claim this as income on your California income tax return.

Taxes 2023: IRS says California, most state tax rebates aren't considered taxable income - CBS News.

The IRS guidance provides that taxpayers receiving rebates for purchases of subsidized products do not need to include the rebates in income but must reduce their basis in the property by the amount of the rebate.

The State of California has made it clear that it does not consider these rebates as income for state tax filing.

Why is state refund not taxable? ›

Your state refund is NOT taxable if you took the Standard Deduction on last year's tax return instead of itemizing your deductions on Schedule A. The general rule is that your state refund is taxable if you deducted your state tax payments on last year's federal tax return.

Are MCTR payments taxable? No. MCTR payments are not taxable income for California state tax or federal purposes.

If you received a refund of state or local income taxes from last year's tax return, you may receive a Form 1099-G reporting this refund as income. If you itemized deductions on your federal return in the same year that you received the state or local refund, the refund may be considered taxable income.

Most income is taxable unless it's specifically exempted by law. Income can be money, property, goods or services. Even if you don't receive a form reporting income, you should report it on your tax return. Income is taxable when you receive it, even if you don't cash it or use it right away.

You report the taxable portion of your social security benefits on line 6b of Form 1040 or Form 1040-SR. Your benefits may be taxable if the total of (1) one-half of your benefits, plus (2) all of your other income, including tax-exempt interest, is greater than the base amount for your filing status.

Non taxable income is money or property you've received from certain sources which are not subject to federal or state income tax under the Internal Revenue Code or state tax regulations. Non taxable income is generally not required to be reported on your tax return.

The FTB says the MCTR payment is not taxable for California state income tax purposes. Also, as Kiplinger reported, the IRS announced last year that it would not tax California Middle-Class Tax Refunds at the federal level.

Is the Clean Vehicle Rebate Taxable? The CVRP is not taxable and you will not receive a 1099 for your rebate. Contact a certified public accountant or tax professional regarding the taxability of the CVRP rebate.

California recently enacted legislation exempting turf replacement rebates from state income tax.