UPDATED: HB 25 Would Remove Relief Payment from Federal Tax in DE & Signed by Gov Carney
UPDATED – 02/10/23 – If you’re waiting to send in your taxes because you received a 2022 Relief Rebate payment from Delaware, Governor John Carney has signed House Bill 25 which would essentially absolve residents from paying federal taxes on Delaware relief rebate checks. While the rebate was not subject to Delaware income taxes – the original version of the law could have made the rebate taxable on your IRS return. The measure was signed on January 19th and was effective upon signing. It is intended to be a qualified disaster relief payment under Section 139 of the Internal Revenue Code.
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Legislation that would treat 2022 Relief Rebate payment as qualified relief payments under the IRS Code was passed in the Delaware State House Thursday with a unanimous vote with 4 members absent. House Bill 25 would essentially absolve residents from paying federal taxes on Delaware relief rebate checks – a one-time direct payment of $300 per resident taxpayer – that they received last year. The rebate is not subject to Delaware income taxes – but could be federally taxed under the original version of the law. HB 25 is now in the Senate Executive Committee.
Additional information from the House Majority Caucus:
House Bill 25, sponsored by House Majority Leader Rep. Valerie Longhurst, would declare that the relief rebate payments be treated as a qualified relief payment under Section 139 of the Internal Revenue Code and is eligible to be excluded from a taxpayer’s gross income. This essentially would exempt residents from paying federal taxes on those $300 payments.
Since the General Assembly passed and Governor John Carney signed HB 360 into law last spring, the state has sent 782,000 checks to Delawareans, with more payments being made this month. The program was designed to provide direct economic relief to hundreds of thousands of Delaware residents to address the economic hardships that rising prices at the grocery store and gas pump created.
Under HB 25, as a federal declared disaster, the COVID-19 pandemic is considered a qualified disaster under the IRS Code. Funds received in connection with the pandemic could then qualify as a disaster relief payment and be excluded from a person’s gross income, saving residents from paying taxes on the $300 payment.
The program was estimated to cost more than $180 million, which was funded through a budget surplus.
