I.R.S. Decides Most Special State Payments Are Not Taxable – Tara Siegel Bernard, New York Times:
The Internal Revenue Service said on Friday that most taxpayers who received one-time, state-issued payments last year to alleviate the pain of higher inflation would not need to report them as income on their federal income tax returns.
It’s not that clear-cut.
IRS clears confusion over state stimulus payments in more than 20 states – Jacob Bogage, Washington Post:
Friday’s announcement means taxpayers in more than 20 states can now file their taxes. Residents of Alaska, California, Colorado, Connecticut, Delaware, Florida, Hawaii, Idaho, Illinois, Indiana, Maine, New Jersey, New Mexico, New York, Oregon, Pennsylvania and Rhode Island will not have any taxes collected against state payments or tax refunds and do not need to report them on their returns, the agency said.
The IRS said the payments made by those states were “for the promotion of the general welfare or as a disaster relief payment,” and therefore are not federally taxable.
People in Georgia, Massachusetts, South Carolina and Virginia will have to report state payments as income, unless the recipient claimed the standard deduction, or itemized deductions but did not receive a tax benefit, the IRS said.
IRS guidance is here.
From the “It’s a Boat! No, it’s a Yacht! No! It’s a Tax Deduction!” file:
These Millionaires Tried Turning a Yacht Into a Tax Break. The IRS Sank Their Plan. – Richard Rubin and Rachel Louise Ensign, Wall Street Journal ($). A rich couple want a second yacht and seek to donate their first yacht to reap a tax break. Their plan didn’t go well:
Lots of charities take shoes and clothes. Some take cars (often selling them for cash). Yachts, not so much.
What followed was an odyssey now approaching its eighth year. Audits, lawsuits, a midsea collision. The lesson: Think very, very carefully before you donate your yacht…
The Ridingers [aka: the rich couple] thought the 2016 donation would save them about $2 million on their taxes. Instead, they ended up paying $3.5 million in taxes and penalties.
The couple had been trying to sell the yacht for $5.4 million. After decade on the selling block, the couple instead donate it to “Veterans Inc., and claimed a $4.9 million deduction, matching an outside estimate of the yacht’s value, according to court filings,” the article states.
The IRS contested the amount of the deduction and things pretty much headed south for the couple – including the IRS stating that the couple could still use the yacht after donating it, because it was still docked outside their home.
This story does not yet have an ending because the case is still winding its way through court. Once it ends, Hollywood will likely buy the rights to it.
Happy Galentine’s Day! Today is about women getting together and celebrating who they are! Salute!
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