Taxability of NYS inflation relief check

[brian-perrigino]

Hi (again), I received a $400 "inflation relief check" in 2025 from New York State.  I'm trying to confirm whether or not it is taxable on my Federal return.  

Google/Gemini implies that it is NOT if you took the standard deduction in 2023(!) but I'd like to confirm that answer.   Search results are below

Thanks.

The New York State inflation relief check is

not taxable for New York State or local income tax purposes but may be taxable for federal income tax purposes. How you account for it on your 2025 federal tax return (filed in 2026) depends on whether you itemized deductions in the 2023 tax year.

Federal Tax Reporting

Whether you need to report the check as income on your 2025 federal income tax return depends on your 2023 federal filing method: 

• If you claimed the standard deduction in 2023, the check is generally not considered taxable by the IRS, and you do not need to report it as income.

[Opus 17]

That is correct.  Do you have a more specific question?

The rebate is treated as a refund of your 2023 state income tax.  If you used itemized deductions and deducted your state income tax on your 2023 federal tax return, the rebate represents a refund of a previous deduction -- that makes it taxable.  (Or, to explain a different way, suppose you deducted $3000 of state income tax.  Because of the $300 rebate, your state taxes were really only $2700 so you deducted too much.  Instead of filing an amended 2023 return to change the deduction, you report the rebate as taxable in the year you received it.)

If you used the standard deduction on your federal return in 2023, then you got no special benefit for the state taxes you paid, so it doesn't change your situation if you get a refund of part of those taxes.  

There is a section on the income page for "taxable refunds of state and local taxes." 

[brian-perrigino]

Thank you. I was just looking to be sure I was understanding it correctly.  Your explanation was great.

Brian

[plutaxi]

I think the situation is a bit more nuanced than just standard vs. itemized.  The "and deducted your state income tax on your 2023 return" is the important point.  For example, if your Schedule A deductions for state/local taxes were SALT limited, then you could have still itemized deductions and not actually deducted any state income taxes because the full $10K deduction taken was from other taxes, e.g., property, not income.  In this case, the $400 rebate would not be taxable.  Agree?

[Opus 17]

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@plutaxi wrote:

I think the situation is a bit more nuanced than just standard vs. itemized.  The "and deducted your state income tax on your 2023 return" is the important point.  For example, if your Schedule A deductions for state/local taxes were SALT limited, then you could have still itemized deductions and not actually deducted any state income taxes because the full $10K deduction taken was from other taxes, e.g., property, not income.  In this case, the $400 rebate would not be taxable.  Agree?

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Yes, that is called the tax benefit rule.  If you paid more than $10,400 (for 2023, and depending on the rebate amount which is less for some people) in state and local income and property taxes, then reducing your taxes by the amount of the rebate would not change your actual deduction, so the rebate is not taxable income now.  

[check this 1040 line 11 3]

New Yorkers who received this payment should have been issued a Form 1099-G even if for most taxpayers this is not taxable income.  NYS does not mail out the Form 1099-G nor alerts taxpayers.  Istead a tax payer or preparer can find copy of Form 1099-G by going to website - tax.ny.gov and click the headings labeled Individuals.  If you scroll down on the Individual Home Page you will see a section called Individual Resources.  Under the column on the left, the 9th item listed says Form-1099-G.   Click to get info.  You will need to enter taxpayer's social security number, zip code and the year of recent NYS return with the total payments shown on page 4 (I believe) of that return (IT-201 or IT 203).  If you see form listed you can enter in tax refund section but by indicating you had standard deduction for 2023 on federal return (or Tax Deductions over $10,000 limit) the program will indicate it is not taxable and it will not show as income on the 2025 Federal Tax Return.

[robs462]

From what I can find online, the NYS inflation refund checks appear to be taxable at the federal level, for everyone.  Per the NY.gov site, link below, the refund was based on your income and filing status, not whether you itemized deductions.   Per several articles online, two links below, the state could have structured the refund program differently to potentially avoid federal taxation, but they didn't do so for whatever reasons.   I may be mistaken, but that's how I'm interpreting it.

https://www.tax.ny.gov/pit/inflation-refund-checks.htm

https://www.syracuse.com/politics/2025/10/ny-inflation-refund-checks-are-taxable-what-you-need-to-kn...

https://www.wxxinews.org/new-york-public-news-network/2025-10-01/you-should-report-gov-kathy-hochuls...

[user17704402042]

Unfortunately, you are right.

[ez10977]

Why should this check be taxable, why is it different from this last paragraph IRS State general welfare programs ?

[rjs]

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@ez10977 wrote:

Why should this check be taxable, why is it different from this last paragraph IRS State general welfare programs ?

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@ez10977 

It's different because the New York Inflation Refund payment is not "based on the need of the individual or family receiving such payments." Everyone gets the same amount.

[Opus 17]

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@rjs wrote:

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@ez10977 wrote:

Why should this check be taxable, why is it different from this last paragraph IRS State general welfare programs ?

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@ez10977 

It's different because the New York Inflation Refund payment is not "based on the need of the individual or family receiving such payments." Everyone gets the same amount.

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This whole story is not clear to me.  Previous rebates from NY have explicitly been "tax rebates", a refund of prior year income tax.  For example, if you only paid $100 of income tax, you would only get a $100 rebate (refund of tax).  If you paid $4000 of tax, you would qualify for the maximum rebate, whatever that is, and it would count as a refund of prior tax.  Refunds of prior tax are not taxable unless you itemized.

The news stories say that the payment is taxable because of the way it was structured, but they don't explain why (as far as I have seen).  I also know that Turbotax had to release a New York State update to change how the payment was handled in the program.  So at this point I would rely on whatever Turbotax says in program once it has been updated.  Or maybe look for a more authoritative article from something like an accounting journal.  

[ez10977]

@rjs 

Thanks for your reply, but this is a complete welfare programs because it's based on the AGI of a taxpayer and someone whose AGI was to high didn't receive it, so this is completely exempt from federal taxes.

[check this 1040 line 11 3]

I'm handling these payments as follows:  1) Going to NYS Form 1099-G online site on the NYS Tax Department webpage and verifying if their was a Form 1099-G issued.  2)  Once confirmed entering the payment under State & Local refunds, the same as if there was a Form 1099-G issued for refund of NYS Income Tax.  In most cases the program will show as not subject to tax based on prior year Tax Return and if took standard deduction.  

[ez10977]

NYS issued 1099-G forms to individuals who received the 2025 rebate check, but the year indicated on the 1099-G is 2025.

To clarify, generally, if you receive a 2025 1099-G from any state with a 2024 year on it, this implies it is taxable if you itemized your deductions in 2024. This is because you would have gained a federal tax benefit in 2024 from the taxes paid to that particular state, and therefore, if refunded, you must recapture that deduction at the IRS level and report it as income in 2025. The same principle applies if you received a 2025 1099-G with a 2023 year on it; its taxability depends on whether you itemized your deductions in 2023.

However, this situation is different. The rebate check was not a refund for taxes paid in 2023; instead, it was a general refund distributed to all families meeting specific income limitations. Therefore, what NYS is indicating with this 1099-G form is that if you itemize your deductions in 2025—for instance, claiming $10,000 in NYS income taxes paid and $12,000 n property taxes paid—you will need to report this rebate check as other income to the IRS. Failure to do so would result in a duplicate gain for you.

Consequently, there is no need to review your 2023 tax records to determine if you itemized. ​This rebate is exclusively taxable for individuals who itemize their deductions in 2025.​

[kooolerking]

As a short cut, use the following link to go directly to the NY State Taxation website to retrieve your 1099-G:

https://www.tax.ny.gov/pit/file/1099g.htm