Is CA Stimulus taxable by IRS?

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Duckie
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Joined: Thu Mar 08, 2007 1:55 pm

Is CA Stimulus taxable by IRS?

Post by Duckie »

In March 2021 I received a $600 direct deposit from the California Franchise Tax Board (FTB) for the Golden State Stimulus. The FTB website states that it is NOT taxable for CA state income taxes but says nothing about federal taxes. I can't find anything specific on FTB, IRS, TurboTax, or using Google.

Is it taxable by the IRS? If so, where would it go on the 1040? Maybe Schedule 1, Part I, line 1 or line 8z? Will CA FTB send a 1099 to report it? Anyone know?
Last edited by Duckie on Sat Jan 15, 2022 8:12 pm, edited 1 time in total.
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JoMoney
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Re: Is CA Stimulus taxable by IRS?

Post by JoMoney »

I'm surprised there isn't more information on this, when I searched I found this:
https://ttlc.intuit.com/community/taxes ... 00/2361170
Which is just somebody on a TurboTax forum posting what they believe without any reference.

My understanding was that that payments were structured as tax rebates. My guess, would be to expect a 1099-G for the payment (as is generated by other state tax refunds), whether or not it's taxable on the federal level would depend on whether or not you itemized your tax deductions (rather than taking the standard deduction), and got a deduction for your state taxes paid. If this is considered a rebate on your state taxes, and you itemized a deduction for your state taxes on your federal return last year, I would think some federal taxes might be owed on the deduction you took (but then got refunded.)
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yog
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Re: Is CA Stimulus taxable by IRS?

Post by yog »

My guess is the Golden State Stimulus was amended to ensure it is technically a grant issued to qualified presumably needs-based recipients and explicitly excluded from state income tax, so therefore no reporting whatsoever will be required, as the federal income reporting requirement is waived under the IRS administrative exception known as the general welfare exclusion.

But what do I know...

Final CA law:
https://leginfo.legislature.ca.gov/face ... 120220AB88

IRS general welfare exclusion explained by the Journal of Accountancy in May 2006:
https://www.journalofaccountancy.com/is ... usion.html
calwatch
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Re: Is CA Stimulus taxable by IRS?

Post by calwatch »

It is an interesting question since California offers its own earned income tax credit, as do many other states, and that is not taxable, even though it often exceeds the amount of state taxes paid. I would treat it similarly.
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