Even though the New York inflation refund check was meant to compensate you for taxes from a prior year, the IRS taxes income based on when you actually receive the money—not the year it refers to.
Tax law follows what’s called the ‘constructive receipt’ rule.’ That rule says:
Income becomes taxable in the year it is paid,
Not the year it was earned,
Not the year it was intended to refund,
And not the year the state calculated it.
So, even if New York calculated the refund based on your 2021 or 2022 return, the check didn’t exist for you until 2025. You couldn’t spend it, deposit it, or use it before then. Because of that, the IRS treats it as 2025 income if it’s taxable at all.
A simple analogy helps: If your employer realizes in 2025 that they underpaid you in 2022 and sends you a catch‑up check, the IRS doesn’t go back and change your 2022 taxes. They tax the payment in 2025, the year you actually got the money.
The same principle applies here.
