Reporting NYS inflation refund

AronG
AronG Member Posts: 3 Newcomer
edited January 22 in Income

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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Answers

  • MatthewD
    MatthewD FreeTaxUSA Admin, FreeTaxUSA Agent Posts: 735 image
    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
    AronG Member Posts: 3 Newcomer
    edited January 22

    Thanks for the reply MatthewD!

  • AronG
    AronG Member Posts: 3 Newcomer
    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
    JanaA FreeTaxUSA Agent Posts: 108 image
    edited January 23

    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

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