If you’re wondering how to report the NY inflation refund on your tax return, the short answer is that you don’t. The IRS treats New York’s one-time supplemental credit payments as non-taxable under the general welfare exclusion, and New York treats them as non-taxable credits at the state level. For most people, there is no line to fill in, no form to attach, and no adjustment to make. Keep a record of the amount you received and move on. The exceptions are narrow: if you received a 1099 that includes the payment, or if you already filed a return that mistakenly counted the check as income, there are specific steps below.
Why the Payment Isn’t Taxable
New York’s inflation refund checks, mailed between late September and December 2022, were supplemental payments tied to the New York State Earned Income Credit and the Empire State Child Tax Credit. They are credits, not income.
On February 10, 2023, the IRS issued IR-2023-23 confirming that state payments meeting the general welfare exclusion are not federal gross income. To qualify, a payment must come from a government fund, be based on the recipient’s financial need, and not be compensation for services.1Internal Revenue Service. IRS Issues Guidance on State Tax Payments New York’s supplemental payments meet all three: they came from state funds, went only to recipients of need-based credits, and had nothing to do with services performed.
New York follows the same treatment. Because the underlying EIC and child credit are non-taxable, the supplemental portions carry the same classification. The check is not reportable income on Form IT-201.
What This Means on the 1040 and IT-201
On your federal return, do not enter the payment anywhere. It does not go on Schedule 1. It does not appear on Form 1040. There is no line for excluding a non-taxable state payment, and no negative adjustment is needed, because you should not have reported it as income to begin with.
On your New York return, no special entry accounts for the check either. The regular EIC and child credit lines on Form IT-201 handle your standard annual credits for the year you’re filing.2New York State Department of Taxation and Finance. Instructions for Form IT-201 Full-Year Resident Income Tax Return The one-time supplemental payment was distributed separately and doesn’t feed back into those calculations.
If You Received a 1099 for the Payment
Most recipients did not receive a 1099 for the inflation refund, because it was classified as a non-taxable credit rather than reportable income. New York issues Form 1099-G for state income tax refunds of $10 or more, but these supplemental credit payments are not state tax refunds in the traditional sense.3New York State Department of Taxation and Finance. Form 1099-G
If a 1099-G or 1099-MISC did arrive showing the payment, the form’s existence doesn’t override the IRS guidance. Report the amount shown on Schedule 1, Line 1 for a 1099-G or Line 8z for a 1099-MISC, and note that the amount is excludable under the general welfare exclusion per IR-2023-23. Most tax software offers a checkbox or prompt to mark a 1099 amount as non-taxable when you enter it, which handles the offset automatically.
It Isn’t a Regular State Tax Refund
The label “inflation refund check” causes confusion, because a regular state income tax refund can be federally taxable under the tax benefit rule. That rule works this way: if you itemized deductions in a prior year and deducted state income taxes, a state refund the following year returns some of the benefit you already claimed, and the IRS treats the recovered portion as income. If you took the standard deduction, state tax refunds aren’t federally taxable because there was no prior tax benefit.4Internal Revenue Service. Revenue Ruling 2019-11
None of that applies here. You never overpaid state tax and got it back. New York issued an additional credit payment on top of what you already received. The tax benefit rule doesn’t reach the inflation refund, no matter which deduction method you used. If tax software tries to route the amount through a state refund worksheet, override the classification.
Fixing a Return That Reported the Payment as Income
If you already filed your 2022 federal return and included the inflation refund check as taxable income, you overpaid. File Form 1040-X to correct it. Electronic filing is available for 2022.5Internal Revenue Service. About Form 1040-X, Amended U.S. Individual Income Tax Return Reduce your previously reported income by the supplemental payment amount, recalculate your tax, and the IRS will refund the overpayment with interest. As of early 2026, the IRS overpayment interest rate for individuals is 7% per year.6Internal Revenue Service. Quarterly Interest Rates
Watch the deadline. Federal law gives you three years from the date you filed the original return, or two years from when you paid the tax, whichever is later, to claim a refund. A 2022 return filed on or before April 18, 2023, is treated as filed on April 18, 2023, so the three-year window closes on April 18, 2026.7Office of the Law Revision Counsel. 26 USC 6511 – Limitations on Credit or Refund If that date is close, file now.
If you also reported the payment on your 2022 New York return, file an amended state return using Form IT-201-X. New York’s amendment deadline generally follows a similar three-year window from the original filing date.
Records to Keep
Even though the payment isn’t taxable, hold documentation showing how much you received and when. The New York Department of Taxation and Finance offers online account tools that let you verify the exact dollar amount and issue date. Keep the records for at least three years from the filing date of the return covering the period when the check arrived. If the IRS or New York ever questions the exclusion, that documentation resolves it quickly.