The key word here is most.
Normally, youmust report state income tax refundson your federal return if youitemize your deductions.
The state issued a supplemental Energy Relief Payment, which will not be subject to federal taxes.
In Georgia, Massachusetts, South Carolina and Virginia, the situation is more complex.
In those states, taxpayers who took the federal standard deduction can exclude state stimulus payments from their income.
Some taxpayers who itemized their payments, however, will have to report their stimulus payments as income.
Deducting $7,000 for state taxes from your federal income taxes would be declaring $500 too much.
The IRS would say that you had overclaimed $500 for your state income tax deduction.
The state may have to issue a corrected 1099-MISC form for those taxpayers.
Otherwise, IRS computers could flag those returns and delay refunds for those taxpayers.
The IRS has achart with links to state payment programsand their respective websites.
If you are still worried about whether your stimulus payment is taxable, consult a tax professional.
