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Reporting NYS inflation refund

AronG

Which year do I put down for my NYS inflation refund check? The 1099-G says tax year 2025 in box 1, but obviously that's not an option for my 2025 tax return. The payment was based on my 2023 tax filing status and income, would I say it's a refund from 2023 then?

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MatthewD

Hi AronG,

Even though it may have been based on 2023, the form says 2025 and the funds were distributed in 2025. Use 2025.

AronG

Thanks for the reply MatthewD!

AronG

https://community.freetaxusa.com/discussion/comment/6355#Comment_6355

Thanks for the reply MatthewD!

The software doesn't give 2025 as an option for what year the refund is for though, given that I'm filing for the 2025 tax year. The default year is 2024, and that's the latest year available as well

JanaA

Hello AronG! In 2025, New York State issued inflation relief payments to certain taxpayers. These payments are similar to those issued in 2023. At this time, the IRS has not released updated guidance regarding the federal taxability of these payments.

In 2023, the IRS stated:
“Payments made by states under legislatively provided social benefit programs for the promotion of the general welfare are not included as income on an individual recipient’s federal income tax return.”

The 2025 inflation relief payments appear to meet the same criteria outlined in 2023, as they are not a refund of state taxes paid and are not compensation for services. The IRS has also noted that, to qualify for the general welfare exclusion, state payments must:
-Be paid from a governmental fund
-Promote the general welfare (based on the need of the individual or family)
-Not represent compensation for services

Since there is no updated IRS guidance, you have two possible approaches:

Option 1 – Treat the payment as non-taxable (aggressive approach)

You may choose to exclude the payment from your federal taxable income based on the 2023 IRS guidance. In this case, you would not report the 1099-G on your return, but we recommend keeping the form with your tax records.

Option 2 – Report the payment as taxable (conservative approach)

You may choose to report the payment as federally taxable “Other Income.” To do this in the software:
-Select the Income tab
-Select Other Income under the Uncommon Income section
-Enter the payment as Miscellaneous Income with the description “NYS Inflation Reduction Payment”

If the IRS issues updated guidance later, you can amend your return to reflect the change.

These payments are not taxable for New York State purposes. NYS guidance states:
“To the extent the credit is included in federal adjusted gross income, it would not be subject to state or local personal income tax.”

If you report the payment as taxable federally, the software will allow you to subtract it in the NY interview under Subtractions From Income.

For additional information, please refer to the IRS and NYS Department of Taxation using the following links:

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

NY Inflation Refund https://www.tax.ny.gov/pit/inflation-refund-checks.htm

hrmbassociate

I’d go by what’s on the 1099-G, not what year it was based on. If the 1099-G says tax year 2025, then it gets reported on your 2025 return (the return you’re filing in 2026). It doesn’t matter that it was calculated using your 2023 info, what matters is the year the state issued the payment.

Boonie

I am NOT a tax professional, but here's my take: Per Inflation refund checks "These one-time payments provide relief to New Yorkers who have paid increased sales taxes due to inflation." So it's essentially a sales tax refund — and only taxable if the taxpayer takes the general sales taxes deduction on his or her Form 1040 Schedule A.

JanaA

Hello! Bonnie and hrmbassociate! The checks were issued in 2025 so this would be reported on your 2025 return if you determine that this needs to be reported on your return. Please see my prior message for specifics.

Jimmy

How do you report this? I didn't get a 1099-G for this check.

Boonie

New York doesn't mail Form 1099-G. You can see/download online

View Your 1099-G Information

Austyn

Hi Jimmy! Boonie is correct -- New York State does not mail Form 1099-G. You can view and download your 1099-G online through the New York State Department of Taxation and Finance at: https://www.tax.ny.gov/pit/file/1099g.htm

Once you have your 1099-G, please refer to the earlier message in this thread for guidance on how to handle the NYS inflation refund on your federal and state return. In short, you may choose to either exclude it from income based on the general welfare exclusion or report it as Other Income -- the prior message walks through both options and the steps to enter it in the software if you decide to report it.