IRS Clarifies Whether 2022 IL Inflation Relief Payments Are Taxable

ILLINOIS — The Internal Revenue Service has given Illinois residents who received state-issued inflation relief payments the go-ahead to file their 2022 tax returns without worrying they’ll have to pay taxes on the income.

The agency had asked taxpayers in multiple states to hold off on filing if they received an inflation relief payment or refund from their state in 2022.

The IRS said after a review Friday that it would not challenge the taxability of payments made in California, Colorado, Connecticut, Delaware, Florida, Hawaii, Idaho, Illinois, Indiana, Maine, New Jersey, New Mexico, New York, Oregon, Pennsylvania and Rhode Island.

Some Alaska taxpayers may also be able to avoid paying federal income taxes on certain payments.

In those states, the agency said, state payments are not taxable because they were made “for the promotion of the general welfare or as a disaster relief payment.”

Earlier this month, Illinois residents were told to hold off on filing their 2022 tax returns if they received a special inflation relief tax refund or payment from the state last year while the IRS sorts out whether it’s taxable, the agency had said.

RELATED: IRS Says IL Special Refund Recipients Should Hold Off On 2022 Tax

Illinois is one of 19 states with diverse programs last year offering inflation relief payments or refunds for taxes.

"We are working with state tax officials as quickly as possible to provide additional information and clarity for taxpayers," the IRS said in a statement Feb. 3.

Maura Kownacki, a spokeswoman for the Illinois Department of Revenue, told Patch earlier this month that tax rebates received by residents last year are not subject to Illinois income tax. She added that the IRS has yet to determine whether the inflation rebates that were handed out last year will be taxed at the federal level.

Some people who live in Georgia, Massachusetts, South Carolina and Virginia will have to report state payments as income. It depends on whether they claimed the standard deduction, or itemized deductions but did not receive a tax benefit, the agency said.

The 2022 federal income tax filing deadline is Tuesday, April 18.

RELATED: What To Know About Filing Your 2022 Tax Return