The MCTR is not taxable on the CA tax return, but no guidance has been provided by the IRS to date as to whether or not it is taxable on the federal tax return. Currently, if you enter the MCTR in TurboTax as a Form 1099-MISC with the MCTR payment in box 3, the program will reflect the payment as a positive amount, as well as a separate negative amount.
On February 3rd, 2023, the IRS issued a statement suggesting that taxpayers wait for guidance before filing returns with special payments from states for 2022. See this statement from the IRS.
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