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What is the Middle Class Tax Refund?

The Middle Class Tax Refund is a one-time payment that may be provided to certain Californians. The Middle Class Tax Refund, also known as the MCTR, provides up to $1,050 to eligible couples filing jointly and up to $700 to other individuals that are residents of California. California started sending out MCTRs on October 7, 2022. 

To be eligible to receive a MCTR payment, you are required to meet the following conditions:

  • You filed your 2020 tax return by October 15, 2021.

  • You meet the California adjusted gross income limits (which vary depending on filing status and whether or not you have dependents).

  • You are not eligible to be claimed as a dependent for the 2020 tax year.

  • You have been a California resident for six months or more during the 2020 tax year.

  • You are still a California resident on the date the payment is issued. 

If you are eligible for the MCTR payment, the payment arrives by direct deposit or debit card. If you e-filed your 2020 California tax return and received a refund by direct deposit, then you can expect to receive a direct deposit of the MCTR payment if you are eligible. All other eligible California residents can expect to receive the MCTR payment on a debit card mailed to the eligible resident. Generally, debit cards are issued to eligible residents that filed a paper tax return for the 2020 tax year, had a balance due on their 2020 tax return, received their 2020 tax refund by check, or have changed their bank account since filing their 2020 tax return. The California Franchise Tax Board has stated that eligible direct deposit recipients can expect to receive the MCTR payment by November 14, 2022. Eligible Californians that are receiving the MCTR payment by debit card can anticipate receiving the debit card by January 14, 2023. If you have questions regarding the MCTR, you may call the California Franchise Tax Board at 800-542-9332.

Which states offer inflation relief payments? 

The 2022 Delaware Relief Rebate Program provides a one-time payment of $300 per Delaware resident taxpayer. Delaware has stated that the purpose of the rebate is to assist Delawareans with the significant inflation at the grocery store and gas pump. For most eligible Delaware residents, no action is required to receive the $300 relief rebate. 

Under the Illinois Family Relief Plan, the state provides one-time individual income tax rebates to eligible taxpayers. To qualify, you are required to have been an Illinois resident during 2021 with an adjusted gross income on your 2021 Form IL-1040 tax return that is under $400,000 if filing jointly and under $200,000 if filing single. Eligible couples can expect to receive a rebate of $100. Eligible single taxpayers can expect to receive a $50 rebate. Eligible taxpayers with dependents can anticipate receiving an additional $100 per dependent for up to three dependents. If you filed a 2021 IL-1040 tax return and are eligible, the rebate is set to arrive automatically. 

New Mexico has approved multiple rebates of up to $1,000 per household. The New Mexico rebates are designed to be sent out automatically to eligible taxpayers. Some of the other states that are offering rebates or other relief payments include South Carolina, Virginia, and Hawaii. If you want to learn whether your state is offering relief payments, you may want to check your state taxing authority’s website. If you did not receive a rebate or relief payment that you believe you are entitled to receive, a Rocket Lawyer network attorney can assist you with determining your eligibility and can provide advice on how to request the appropriate rebate or relief payment. 

Does the Middle Class Tax Refund count as income for state tax purposes?

The California Franchise Tax Board has stated that the MCTR payment is not taxable income for California state income tax purposes. You are not required to report the MCTR payment as income on your California income tax return. 

Illinois has stated that the one-time rebate under the Illinois Family Relief Plan is not subject to Illinois income tax. Similarly, Delaware has stated that the one-time payments made through the 2022 Delaware Relief Rebate Program is not subject to Delaware income tax. 

Generally, when states offer tax rebates or inflation relief payments, the state does not include those rebates or payments as taxable income. However, it’s best to check with your tax preparer or state taxing authority to verify whether such rebates or payments are taxable in your state. If you have questions about your tax return or need help preparing a tax return, contact a tax professional for assistance.

Does the IRS count Middle Class Tax Refunds or inflation relief payments as taxable income?

State rebates, credits and refunds are typically reported to you on a Form 1099-G that you receive from the issuing state. The amount of rebate, credit, or refund can be found in Box 2 of your Form 1099-G. 

If you claim the standard deduction on your previous year’s tax return, then the amount in Box 2 of the Form 1099-G is usually not taxable to you. However, if you itemized deductions on the previous year’s tax return, then all or part of the amount in Box 2 may need to be included as taxable income in the year that you receive the refund if you deduct state and local income taxes on your tax return for that year. 

Consult a tax professional to help prepare your tax returns and answer tax questions that you might have regarding rebates or relief payments.

This article contains general legal information and does not contain legal advice. Rocket Lawyer is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.


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