Could Some Massachusetts 62F Refunds Be Taxed?

Bay Staters already knew that their 2022 Massachusetts 62F refund wouldn’t be taxed as income at the state level. But if you received a Massachusetts 62F refund, you may have been wondering whether the amount would be taxed on your federal income tax return.

Well, the IRS has weighed in on whether special 2022 state "stimulus" check payments are taxable and the answer is... maybe. The agency announced last week that most Mass. 62F refunds from 2022 won’t be taxed on 2022  federal returns. But, in certain situations, some Massachusetts residents may have to report the 62F refund income. Here’s what you need to know. 

Massachusetts 62F Tax Refund 2022

In 2022, Massachusetts returned nearly $3 billion in budget surplus to eligible taxpayers. Each eligible resident received a Massachusetts tax refund via check or direct deposit, which amounted to about 14% of their state income tax liability from their 2021 tax return. The special payments came about because of a law that Massachusetts voters approved in 1986, known as Chapter 62F. That law requires Massachusetts to return excess revenue to taxpayers when that excess reaches a certain threshold.

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Though somewhat unique because of Chapter 62F, the Massachusetts tax refunds were part of a trend in 2022 where many states, with post-pandemic budget surpluses, returned money to eligible residents. Some of those special payments were called “stimulus checks,” inflation relief payments, or tax rebates and refunds. And some states are still sending so-called stimulus checks this year.

A couple of weeks ago, the IRS asked taxpayers in Massachusetts and in twenty-one other states to hold off on filing their 2022 federal income tax returns until the agency could decide whether the payments would be considered taxable income. But last week, the IRS said (opens in new tab) that most of the special payments made by Massachusetts, and in other states, won’t be taxable income on 2022 federal returns. 

Is the Mass. Tax Refund Taxable? 

If you received one of the 2022 Massachusetts tax refunds and claimed the standard deduction in 2021, or if you itemized deductions but didn’t receive a tax benefit as a result, the IRS says that special refund won’t be taxable on your 2022 federal income tax return. (An example of “not receiving a tax benefit” as a result of itemized deductions would be if the $10,000 limit on state and local tax (SALT) deductions applied on your return, according to the IRS (opens in new tab).) 

What does that mean for you? The good news is that if you took the standard deduction (which most people do) on your 2021 tax return, you shouldn't be taxed on the amount of your 2022 62F refund when you file your taxes this tax season. However, if you itemized deductions and aren’t sure whether you need to report the Mass. tax refund on your federal tax return, check with a  professional before you file.

Also, if you itemized on your 2021 federal return, you may have received an IRS Form 1099-G (opens in new tab) from the Massachusetts Department of Revenue (opens in new tab), related to the 2022 62F tax refund. Before you ignore that 1099-G, check with your tax preparer to see whether you fall into a category of taxpayers that don’t have to report the 62F income.

Is Massachusetts Getting Another "Stimulus" Check? 

It’s hard to say whether future 62F tax refunds are coming from Massachusetts. Various economic factors that contributed to the huge revenue surplus and the 62F refunds for 2022, (e.g., stock market gains, higher sales tax revenue and corporate tax collections) reportedly might not have the same impact on the Chapter 62F formula this year.

Additionally, some lawmakers and policy advocates have expressed concerns about various aspects of Chapter 62F, including whether the tax refunds issued in 2022 primarily benefited wealthy residents (opens in new tab). There are also questions about whether the 62F law needs to be revisited, or revised, given the billions of dollars that had to be returned to Massachusetts taxpayers in 2022. 

Related Content

• Massachusetts 62F Tax Refunds Are Still Available
• Is Your 2022 State "Stimulus" Check Taxable?
• Tax Season is Here. What to Know Before You File