State Tax Treatment of Economic Stimulus Rebates

The economic stimulus rebates ($600 (single) or $1,200 (married), plus $300 per child under age 17) are not treated as taxable income for federal income tax purposes.  Several states have explained the state income tax treatment of the rebates:

States that exempt economic stimulus rebates from state income tax:

• California
• Connecticut
• Iowa
• Louisiana
• Missouri
• New York
• Ohio
• Oregon

States that currently tax economic stimulus rebates (although pending legislation would exempt the rebates):

Some states ... will tax the rebate. These are states that allow a taxpayer to deduct the federal income tax that they pay from their state taxable income. Any reduction of federal taxes (such as a rebate) will also reduce the amount of federal tax that a taxpayer may deduct from their state taxes, and thus increase the taxpayer’s taxable state income.

• Alabama

(Hat Tip:  Kay Bell.)