IRS Says Some Virginia 2022 Tax “Stimulus” Rebates Aren't Taxable

If you owed money on your Virginia tax return in 2021, you were in luck in 2022. That's because the Virginia General Assembly passed a law giving some Virginia taxpayers a 2022 tax "stimulus" rebate of up to $250 for individual filers, and up to $500 for joint filers. Most of those rebates were sent by October 31, but you had to have filed your 2021 Virginia individual income tax return by November 1 to receive the Virginia tax rebate.

Is Your 2022 Virginia Tax Rebate Taxable?

If you received a Virginia tax rebate payment, you may have been wondering whether the amount will be taxable on your federal income tax return. On February 10, the IRS announced that most of the special state payments that were sent to residents during 2022 won't be taxable on 2022 federal returns. The variety of state stimulus check programs and the complexity of the different programs have made it challenging for the IRS to provide clarity to taxpayers before now.

The IRS says that  if you received one of the Virginia 2022 tax rebates 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 the special state tax rebate 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.

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So, the good news is that if you took the standard deduction on your 2021 tax return, you shouldn't be taxed on the amount of your 2022 Virginia one-time tax “stimulus” rebate when you file your 2022 taxes this tax season.

I'ts unclear at this time, whehter Virginians who received the rebates already were issued Form 1099-G. And if you're unsure whether your Virginia tax rebate is taxable, consult a professional before you file your 2022 federal return.

Virginia 2022 Tax "Stimulus” Rebates

The one-time 2022 tax "stimulus" rebate check in Virginia is part of a recent trend. Other 2022 state stimulus checks have been issued in California, New York, and Massachusetts, to name just a few of the states that have sent or are currently sending, stimulus payments to their residents.

Why Have So Many States Issued So-Called State "Stimulus" Checks?

Well, a lot of states were sitting on budget surpluses in part due to the influx of COVID-19 pandemic relief funds from the federal government.  

It’s important to know that these state tax rebate checks and state stimulus payments are different from the three rounds of COVID-19 stimulus payments that you may have received from the federal government. That federal stimulus program has ended.

But, note, if you didn’t receive your third COVID stimulus payment of $1,400, or your 2021 advance child tax credit payment, you might still be eligible to file your 2021 federal income tax return and get those funds.

When Did Virginia Send Tax Stimulus Checks?

Virginia sent rebate payments in the order it received your tax return. If you filed your Virginia tax return by September 5 and were eligible for the 2022 Virginia stimulus tax rebate, your rebate should have been sent by October 17. So, you should have received it by October 31.

Some taxpayers received a check in the mail and others received the 2022 Virginia tax rebate through direct deposit to their bank account. If you’ve moved since last year, the check may have been forwarded to your new address and if Virginia doesn’t have your banking information on file, you may receive a paper check in the mail.

Note: you had to file your 2021 Virginia tax return by November 1, 2022, to receive the rebate.

Do You Have to Pay Taxes on the 2022 Virginia Tax Rebate?

Are More Federal Stimulus Checks Coming?

It’s important to know that the 2022 Virginia tax rebate and other 2022 state tax rebate checks and state stimulus payments are different from the three rounds of COVID-19 stimulus payments that you may have received from the federal government in the recent past.

That federal stimulus check program has ended. However, if you did not receive your third COVID stimulus payment of $1,400, or your 2021 child tax credit, you might, in limited circumstances, be able to file your 2021 federal income tax return and get those funds.