February 28, 2023 8:37 pm

Pandemic-Related State Payments Not Includible in Gross Income

During the pandemic, a number of states made certain COVID-19-related payments to residents and the federal tax treatment of these special payments had been unclear. The IRS has now clarified that these payments to residents in 21 states are not income and do not have to be reported by the recipients on their 2022 returns (IR-2023-23). The IRS views the payments as being for the promotion of the general welfare or as a disaster relief payments, both of which are not taxable.

The states involved are: Alaska (but not the annual Permanent Relief Fund Dividend) California, Colorado, Connecticut, Delaware, Florida, Hawaii, Idaho, Illinois, Indiana, Maine, New Jersey, New Mexico, New York, Oregon, Pennsylvania and Rhode Island.

For residents in Georgia, Massachusetts, South Carolina and Virginia, their payment is excludable if the payment is a refund of state taxes paid and either the recipient claimed the standard deduction or itemized their deductions but did not receive a tax benefit.

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Tax Glossary

Condemnation

The seizure of property by a public authority for a public purpose. Tax on gain realized on many conversions may be deferred.

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