How is the IRS categorizing the $1,000 teacher bonus given by Florida Dept of Education?

[chaz11]

In January 2022, the Florida Dept of Education gave teachers a $1,000 check in recognition of their devotion to students and gratitude for service. I believe included was a letter stating that this was a qualified disaster relief payments under section 139, because it might have come from COVID money to Florida from federal.

[TeresaM]

The IRS had a press release on Feb 3rd that they are reviewing the taxability of state payments such as Florida Teacher bonuses. You may wish to wait until that is reviewed and they give revised guidelines for reporting. It may change entry into the return in TurboTax. 

Feb 3, 2023

The IRS is aware of questions involving special tax refunds or payments made by states in 2022; we are working with state tax officials as quickly as possible to provide additional information and clarity for taxpayers. There are a variety of state programs that distributed these payments in 2022 and the rules surrounding them are complex. We expect to provide additional clarity for as many states and taxpayers as possible next week.

[chaz11]

Thank you for your quick reply. I just found that the IRS issued new guidance and have excluded these payments from income.

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

"Payments from the following states fall in this category and the IRS will not challenge the treatment of these payments as excludable for federal income tax purposes in 2022."

[DMarkM1]

You should review the chart (here) included in the link you provided to see the payments made by states which are excludable.  FL for example is "Hope Florida, a pathway to prosperity..."  

The IRS news item goes on to say under "Other Payments"

Other payments that may have been made by states are generally includable in income for federal income tax purposes. This includes the annual payment of Alaska's Permanent Fund Dividend and any payments from states provided as compensation to workers.

[chaz11]

A supplemental letter sent with the check stated that "this payment is a one-time payment to reimburse reasonable and necessary personal, family, living and funeral expenses incurred as a result of the CCOIVD-19 pandemic." It further states "this payment is considered a qualified disaster relief payment under section 139 of the Internal Revenue Code. Qualified disaster relief payments under section 139 are generally not includible in gross income for tax purposes and are not reportable as income on a federal income tax return. There may be tax implications of this payment depending on your individual circumstances. You should consult with your tax advisor..."

[JulieS · Accepted solution]

Yes, the IRS has finally decided that this type of payment is not taxable on your federal return. Click here to read the news release discussing this topic.