Middle class tax refunds, received in 2022, will no longer be taxed

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By Mahim

Californians have just learned some long-awaited news: the IRS has chosen how to tax millions of Americans who received special state payments known as “stimulus checks” in 2022. These payouts were known as Middle-Class Tax Refunds in California (or MCTRs). According to the California Franchise Tax Board, the MCTR program led to the state giving out more than $9 billion in surplus monies, helping roughly 31 million eligible households.

The IRS had just a few weeks prior requested that people in California and other states postpone filing their federal income tax returns for 2022 until a decision regarding the special payments was reached. The organisation has now said that it would not charge California MCTRs.

Middle Class Tax Refunds in California for 2022

The one-time tax relief payments for the middle class in California (also known as California “stimulus” payments) ranged from $200 to $1,050. According to 2020 California tax filings, the amount eligible residents received was based on their adjusted gross income, filing status, and family size. From October 2022 to January 2023, the state sent the funds via debit cards or direct deposit. Most California MCTR payments have already been made as of right now.

The California MCTR payments in 2022 followed a pattern. Many states with post-pandemic budget surpluses gave eligible citizens tax refunds or rebates as well as inflation relief or “stimulus” payments. The IRS won’t tax the majority of the contributions made in 21 states, including California, due to the distinctiveness of the various state programs. In states where some payments were regarded as compensation or as refunds of taxes paid, some taxpayers could be required to declare them.

For many Californians, who also have a little extra time this year to file their federal tax forms, the IRS decision is excellent news (additional details on that below). However, the IRS notification came a few weeks after California had already begun providing people with IRS 1099-MISC forms, which was a touch late for the Golden State.


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