The IRS has issued guidance that most state tax payments that you received related to general welfare and disaster relief are non-taxable. IRS states that, residents in the following states do not need to report these state payments on their 2022 tax return:
| California | Hawaii | New Jersey | Rhode Island |
| Connecticut | Idaho | New Mexico | Alaska* |
| Colorado | Indiana | New York | |
| Delaware | Illinois | Oregon | |
| Florida | Maine | Pennsylvania |
The IRS also states that payments from the following states in 2022 fall in this category and will be excluded from income for federal tax purposes unless the recipient received a tax benefit in the year the taxes were deducted.
| Georgia |
| Massachusetts |
| South Carolina |
| Virginia |
If you reside in a state not listed above, the IRS will not challenge you if you file a 2022 return and exclude this payment or if you file an amended return to exclude this payment.
If you are experiencing difficulty with paying the tax you owe. There may be additional relief available to you. Find out if an offer in compromise is the best option for you. See our blog, IRS Offer In Compromise: Pay Less Than The Full Amount of Tax Debt Due Offers, Should I Apply?
Reference:
IR-2023-23, February 10, 2023 --- IRS issues guidance on state tax payments to help taxpayers