Since we have no actual written authority from the IRS as of now, and this is a refund of California (CA) tax which would have been considered income earned and taxed previously, i.e., refund of tax, it should not be taxable unless you specifically deducted tax through itemized deductions in a prior year.
Our tax expert @VolvoGirl has also provided additional guidance specific to your question:
- 'There was a new Turbo Tax program update yesterday on Jan 26, 2023. The CA MCTR is now not taxable for federal and state. When you enter the 1099Misc box 3 it should ask ....Do any of the uncommon situations apply? And in my Desktop program the 3rd item listed is California Middle Class Tax Refund.
- When you click on that then at the bottom it will say....The California Middle Class Tax Refund (MCTR) will not be taxable on your California or federal returns.
@CA_Joe
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