Washington—The Internal Revenue Service announced on Friday that economic relief payments distributed by California will not be subject to federal income tax. The IRS guidance is available here.
The announcement came after Senators Dianne Feinstein and Alex Padilla (both D-Calif.) called on the IRS last week to not tax these payments.
“The IRS made the right call by not taxing these payments,” the senators said in a joint statement. “These were economic relief payments to help families continue to recover from the pandemic and afford the rising cost of goods. The state legislature drafted the legislation to ensure these payments would meet the ‘general welfare’ exemption by the IRS. We’re pleased the IRS agreed and families won’t be subject to any additional taxes.”
The California state legislature last year passed legislation to distribute payments between $200 and $1,065 to middle-class Californians and made these payments exempt from state income tax.