The Tax benefit rule, IRS Publication 525, will determine if it is taxable on the federal return.
You must include a recovery in your income in the year you receive it up to the amount by which the deduction or credit you took for the recovered amount reduced your tax in the earlier year. For this purpose, any increase to an amount carried over to the current year that resulted from the deduction or credit is considered to have reduced your tax in the earlier year.
If any of the amount was used as a deduction on your federal return in 2021, then some or all of it may be taxable on the 2022 return.
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