2023 Alabama Tax Rebate

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Beau16
Beau16 Member Posts: 2 Newcomer
edited January 15 in State Filing

Received a $300 rebate. It is not taxable on my Alabama state return but is it taxable on the 1040 federal return?

Answers

  • BradyP
    BradyP FreeTaxUSA Agent Posts: 7
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    Great question! Can you please specify what this rebate is for, or the reason why you received it?

  • Taxlady06
    Taxlady06 FreeTaxUSA Agent Posts: 59
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    For the 2022 tax filing season, the IRS excluded most state tax rebates and/or payments from federally taxable income. They have not however, provided information on how they will handle the taxability of these payments for 2023.

    As a general rule, taxpayers who choose the standard deduction on their federal income tax returns do not owe federal income tax on state tax refunds (which generally includes rebates). If, however, you itemized your deductions in 2022 and took a deduction for state taxes paid, your rebate may be taxable if the IRS does not make a determination to make these types of payments non-taxable in 2023.

  • Beau16
    Beau16 Member Posts: 2 Newcomer
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    This was a tax rebate issued by the state to offset high inflation. It is similar to the tax rebates( not refunds) issued by many states in 2022

  • MatthewD
    MatthewD FreeTaxUSA Team Posts: 247
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    Hello,

    The IRS issued a statement that inflation or tax rebates are generally not taxable. If it was a tax rebate for taxes and you itemized your deduction, it is possible you must report it as taxable state refunds. Here is the statement from the IRS. It is from Feb 2023, but it is likely applicable to your situation.

    https://www.irs.gov/newsroom/irs-issues-guidance-on-state-tax-payments-to-help-taxpayers