I received a Middle Class Tax Refund from the state of california. Is this considered taxable income? I received a 1099-Misc form

[Ace in Space]

If that were the case, they would have called it a one time tax relief and given everyone the same amount.  However, they call it a refund and base the amount on your 2020 tax return.  The fact that California doesn't tax it means it's a tax refund.  Fed Pub 525 is clear that it would be taxable if you itemized deductions.

[VolvoGirl]

It is a one time payment and it is not a refund from your tax return it's just based on your prior AGI.  FTB page says....."The Middle Class Tax Refund (MCTR) is a one-time payment to provide relief to Californians".  From https://www.ftb.ca.gov/about-ftb/newsroom/middle-class-tax-refund/index.html 

If it was a refund due to you it would be on a 1099G form, not a 1099Misc.   

[ronaldcox3883]

Unfortunately, I have to agree with you. Also note that it follows the general rules for 1099-MISC: greater or less than $600. At least you can go in manually in the California forms and make the adjustment. It would have been super helpful if TurboTax had picked this up automatically.

[Ace in Space]

One time relief from inflation has nothing to do with it.  The fact it was based on your 2020 return and is called a tax refund means it could be a tax refund.  FTB does not set IRS policy.  To date the only IRS statement I have found is in Pub 525.  Don't overlook the fact that the FTB in their haste to get it out called it a 1099-MISC rather than  1099-G. I await the IRS ruling.

[Ace in Space]

😀 Looks like I was right.  CA Middle Class Tax Refund is not taxable for both state and federal returns.  See IRS 2023-20 Feb 10, 2023.

[jung_a]

So are we to remove the 1099-MISC amount from our federal returns since the California Middle Class Tax Refund from the state of California is considered non taxable from Turbo Tax 2022?

[Bsch4477]

Yes remove it.