The Internal Revenue Service has said that the 2022 state tax rebate will not be taxed by the federal government.
The $300 state tax relief rebate that nearly 800,000 Delaware residents received in 2022 will not be taxed by the federal government.
The Internal Revenue Service said Friday that the First State is one of 21 states whose rebates will not be included in income because they are designated as qualified disaster payments.
The General Assembly authorized the payments last year, on the heels of two years of complaints from Republican members that the state’s record high surpluses should mean tax breaks for residents instead of only splurge spending by the state.
Legislators contended it was needed to help people still recovering from losses during the coronavirus pandemic and because of rising gasoline prices and widespread inflation.
Then in January, House Democrats moved to classify the tax rebate as a qualified disaster payment, and the House Bill 25 blew through the House and Senate before they took their February break.
Rebate cost state $180 million
The money also is not subject to Delaware income taxes.
House Minority Leader Rep. Lyndon Yearick, R-Camden, Wyoming, in a January press release that he hoped the General Assembly “can retain the bipartisan cooperation demonstrated on this measure as we look to further help working Delawareans struggling with higher inflationary costs.”
The Delaware program was estimated to cost more than $180 million, which was funded through a budget surplus.
The IRS announcement Friday said it had “determined that in the interest of sound tax administration and other factors,” Delaware residents didn’t need to report that money on federal tax returns.
Other states whose payments were related to general welfare or disaster relief included California, Colorado, Connecticut, Delaware, Florida, Hawaii, Idaho, Illinois, Indiana, Maine, New Jersey, New Mexico, New York, Oregon, Pennsylvania and Rhode Island.
Some Alaska, Georgia, Massachusetts, South Carolina and Virginia residents also will be able to benefit from the ruling, if they meet certain requirements.
