Relief Payments Will Be Tax-Free in Many States, IRS Says (1)

The IRS on Friday issued guidance on the federal tax status of special payments that 21 states sent to households last year.

The agency said that taxpayers in many states don’t need to report their payments, which pertain to disaster relief, on their federal tax return. The applicable states include: California, Colorado, Connecticut, Delaware, Florida, Hawaii, Idaho, Indiana, Maine, New Jersey, New Mexico, Oregon, Pennsylvania, and Rhode Island.

“If a taxpayer does not include the amount of one of these payments in its 2022 income for federal income tax purposes, the IRS will not challenge the treatment of the 2022 ...