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18003: CA - Middle Class Tax Refund (Drake22)


California

Where do I enter the Middle Class Tax Refund payment amount so that it is excluded from California income?

 

California will issue a Form 1099-MISC to taxpayers who received a California Middle Class Tax Refund of $600 or more. Per the CA 540 Instructions, "California excludes the Middle Class Tax Refund payment from gross income. If you received the Middle Class Tax Refund payment and you included this payment as income for federal tax purposes on line 8z, column A, enter the amount on line 8z, column B."

The IRS released guidance on February 10, 2023 regarding the federal taxability of these payments for 2022 returns: "... if a taxpayer does not include the amount of one of these payments in its 2022 income for federal income tax purposes, the IRS will not challenge the treatment of the 2022 payment as excludable for income on an original or amended return." See Related Links below for details. 

If the amount is included as income at the federal level, in Drake Tax, go to CA indata entryscreen CA (Sch CA/CANR Contributions) > click on the Line 8 detail tab at the top of the screen and enter the amount on line 8z Middle Class Tax Refund under Column B Subtractions.

 

For more information, see the CA FTB page. 


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