Will Your State Rebate Check Be Taxed for 2023?
Here's what the IRS says about taxing 'state stimulus checks' and other special state rebates and what it could mean for you.


State "stimulus" checks, tax rebates, and inflation relief payments are popular. Millions of people in 21 different states received special state payments last year. And several states are sending more rebates and surplus tax refunds this year.
So, if you’ve received a special state payment or are looking forward to one, a question on your mind might be whether you’ll have to pay tax on that money — the IRS has offered an answer.
The agency announced guidance on the federal tax status of these state “stimulus” and other special payments made to individuals. The guidance, which applies to payments received in 2023, is part of the agency’s effort to make the tax consequences surrounding these payments more straightforward for taxpayers.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
State 'stimulus' check 2023 update
Clarity from the IRS on so-called state “stimulus checks” is essential because millions of taxpayers across the U.S. have received special rebates and payments as states return surplus revenue to eligible residents. As Kiplinger has reported, these payments vary by state, type, amount, and eligibility criteria.
- Last year, the IRS issued guidance applicable to 2022 state payments.
- At that time, the agency said most of the state stimulus payments weren’t taxable, but that in some cases, taxpayers might need to report the payments on their federal returns.
- The IRS also suggested that some taxpayers consider amending their 2022 tax returns if they reported the special state payments as income.
This latest guidance addresses several questions involving 2023 special state payments. Here’s what you need to know.
IRS weighs in on state rebate payments
In most cases, according to the IRS, taxpayers who receive special state payments (one-time refunds, rebates, or other payments) in 2023 won't have to include the payments in their income for federal tax purposes. That is especially relevant for those who opt for the standard deduction on their federal returns. (Most taxpayers claim the standard deduction.)
What if you itemize deductions? If you itemize deductions on your federal income tax return and receive a state tax refund or special payment, the IRS says you might need to include it in your federal income. But that is only if you deduct the state tax paid. (Due to the $10,000 limit on itemized deductions for state income and property taxes, some taxpayers won't need to include the state refund in their income.)
That can be confusing, so if you’re unsure, consult a trusted tax professional before filing your 2023 federal return.
Spillover 'stimulus' payments from last year
It's worth noting that the IRS also provided guidance on a specific situation that occurred last year with certain state programs. (These programs provided payments that eligible residents didn’t receive until early 2023.)
- According to the IRS, even if you don’t receive your special state payment for 2022 until 2023, you can still exclude it from your federal income.
- (You would follow the same rules that applied to the 2022 state payments.)
'General welfare' program payments
In addition, the latest IRS guidance provides information on what the agency refers to as "state general welfare programs." Certain states offer payments to individuals intended to support the general well-being of individuals or families in need. The IRS considers this money non-taxable income, but only if it comes from a governmental fund and is not compensation for services rendered.
Note: Determining whether payments qualify for this exclusion can be complex and depends on various factors. The IRS provides an example to help clarify how this general welfare exclusion works.
Is the Colorado TABOR refund taxable?
There has been debate recently about whether Colorado TABOR (Taxpayer Bill of Rights) "Cash Back" payments are exempt from federal income tax. The new IRS guidelines don't explicitly mention the Colorado payments, which are essentially refunds to Coloradans of state sales taxes paid.
Several Colorado state legislators and Gov. Jared Polis have requested that the IRS clarify this issue and avoid a situation where the TABOR refunds are considered taxable.
Meanwhile, the IRS is requesting comments on the federal tax treatment of special state payments, particularly those similar to TABOR refunds. The deadline for submitting comments on the guidance is Oct. 16, 2023.
Will the IRS tax Minnesota ‘Walz checks’?
According to Minnesota Governor Tim Walz, the IRS will tax rebates sent to eligible Minnesota residents in 2023. These rebates, commonly known as "Walz checks," were worth up to $1,300 in some cases and were a result of a $3 billion tax relief bill passed earlier this year. (That bill also included a child tax credit for the state worth up to $1,750 per child dependent.)
Walz strongly disapproved of the IRS' decision to consider the rebate checks received by Minnesotans as taxable income. The Governor's frustration was evident during a December news conference discussing the state's projected budget surplus for 2024. “It’s bull—,” Walz told reporters.
Meanwhile, the Minnesota Department of Revenue plans to send 1099-MISC forms to rebate recipients for federal tax return purposes.
More: IRS Will Tax Minnesota 'Rebte Walz checks'
Related Content
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

As the senior tax editor at Kiplinger.com, Kelley R. Taylor simplifies federal and state tax information, news, and developments to help empower readers. Kelley has over two decades of experience advising on and covering education, law, finance, and tax as a corporate attorney and business journalist.
-
The Retirement Bucket Rule: Your Guide to Fear-Free Spending
Forget market declines or rising inflation. With this strategy, you won’t have to worry about any of that during retirement.
-
How Big Will the Fed Rate Cut Be This Fall?
A dismal July jobs report has lifted expectations for fall rate cuts. But just how low could the fed funds rate be by year's end?
-
The Most Tax-Friendly State for Retirement in 2025: Here It Is
Retirement Tax How do you retire ‘tax-free’? This state doesn’t tax retirement income, has a low median property tax bill, and even offers savings on gas. Are you ready for a move?
-
Five Ways Trump’s 2025 Tax Bill Could Boost Your Tax Refund (or Shrink It)
Tax Refunds The tax code is changing again, and if you’re filing for 2025, Trump’s ‘big beautiful’ bill could mean a bigger refund, a smaller one or something in between next year. Here are five ways the new law could impact your bottom line.
-
New SALT Deduction Could Put Thousands Back in California Homeowners’ Pockets
Tax Breaks The federal state and local sales tax (SALT) deduction cap is higher this year, and could translate into bigger savings for Golden State homeowners.
-
Money for Your Kids? Three Ways Trump's ‘Big Beautiful Bill’ Impacts Your Child's Finances
Tax Tips The Trump tax bill could help your child with future education and homebuying costs. Here’s how.
-
Why Your Summer Budget Feels Tighter: Tariffs Push Up Inflation
Tariffs Your summer holiday just got more expensive, and tariffs are partially to blame, economists say.
-
Alabama Tax-Free Weekend 2025
Tax Holiday Here’s everything you need to know about the 2025 back-to-school Alabama sales tax holiday.
-
Key 2025 Tax Changes for Parents in Trump's Megabill
Tax Changes Are you a parent? The so-called ‘One Big Beautiful Bill’ (OBBB) impacts several key tax incentives that can affect your family this year and beyond.
-
‘I Play Pickleball in Retirement.’ Is It HSA-Eligible?
Retirement Tax Staying active after you retire may be easier with these HSA expenses. But there’s a big catch.