IRS Exempts Certain State Tax Refunds

Normally when a taxpayer receives a state tax refund, they may be subject to tax on the refund in the year in which it was received. However, during 2022 many states experienced disasters that in an effort to help recovery, states issued additional payments. These payments have been deemed not taxable by the IRS. The states impacted are California, Colorado, Connecticut, Delaware, Florida, Hawaii, Idaho, Illinois, Indiana, Maine, New Jersey, New Mexico, New York, Oregon, Pennsylvania and Rhode Island. Taxpayers who received these payments in these states do not need to report the payment on their 2022 tax return.