IRS says state tax relief will not be taxable income in 2022

Agency had thrown filing process into confusion.
irs building

The Internal Revenue Service this week cleared up confusion surrounding the tax status of certain 2022 relief payments, paving the way for filers to submit their returns without having to unexpectedly declare tax rebates as income.

The agency earlier in February had asked taxpayers in nearly half of all U.S. states to hold off on filing while the IRS determined if relief rebates sent by those states constituted taxable income. 

On Friday the IRS said in a notice on its website that it had “determined it will not challenge the taxability of payments related to general welfare and disaster relief.”

“The IRS appreciates the patience of taxpayers, tax professionals, software companies and state tax administrators as the IRS and Treasury worked to resolve this unique and complex situation,” the agency said.