Is California’s Middle Class Tax Refund taxable by Uncle Sam? (2023)

The saga of California’s inflation refund is coming to a close even as qualified taxpayers wait for their payments.

Gov. Gavin Newsom’s office said last fall that the state would distribute the one-time Middle-Class Tax Refund payments between late October and mid-January. The payments, which range from $200 to $1,050, are aimed at taxpayers who earn less than $500,000.

The good news: The Franchise Tax Board and its $25 million contractor, Money Network, have sent a combined 16,600,982 payments to recipients, either by direct deposit or debit card. While an early estimate from the state indicated the refund would reach 18 million recipients, the FTB now says the actual number is likely lower.

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“It’s difficult to say how many more payments will ultimately be issued upon validation, but it’s clear that the ultimate total will be less than the 18 million originally estimated,” FTB media liaison Andrew LePage told us via email on Wednesday, Jan. 25.

So how many payments are still in the system? A call center employee at Money Network, the company managing the distribution of debit cards, said on Jan. 20 that as many as 1 million payments were still being “sent out” and the company had been given until the end of the month to finish the work.

That number prompted us to email the FTB for confirmation, even as more emails from confused and frazzled readers spilled into our MCTR inbox last week.

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Is California’s Middle Class Tax Refund taxable by Uncle Sam? (1)

We sent a bunch of questions to LePage. His answers have been edited for length.

Q: A Money Network representative told us Friday, Jan. 20 that the company has been given until the end of January to distribute more than 1 million MCTR debit cards. Is this true?

A: It is incorrect that we still have 1 million debit cards to issue or mail. As of mid-January, nearly all debit card payments had been mailed for those tax returns that have been identified as MCTR eligible.

READ MORE: MCTR questions: Can I get a paper check instead of a debit card?

Some of those payments are still in the mail and should be received by or around the end of this month.

We are seeing confusion between the use of the word mailed, distributed and issued and that may be the source of this issue.

Q: How many more payments are still in the pipeline?

A: A relatively small number of payments – those that are exceptions that fall into manual review to ensure eligibility – will be issued through Feb. 14 – the latest date we’ve identified for mailing cards to those who had recent address changes. In other, very unusual cases – again, exceptions in manual review – payments could be issued later than Feb. 14.

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Once the cards are mailed, FTB is not able to track when the USPS delivers the card and our data is based on a mail date.

Toward the middle of next month, we hope to have a better idea – at least in a rough sense – of the ultimate total. (Again, a relatively small number of returns are still being processed to ensure eligibility.)

Is California’s Middle Class Tax Refund taxable by Uncle Sam? (2)

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Q: Is there a reason why the distribution didn’t finish by mid-January?

A: FTB has completed distribution of the cards as originally planned through the middle of January. It is also important to understand that the January 14th date was not a deadline. It was an expectation that has now been met. Over the next several months, as we continue handling exceptions or the re-issuance of cards, no deadline exists that would bar us from engaging in this critical work.

Q: Also, are there any more direct deposits heading to bank accounts? If so, how many?

A: Nearly all direct deposits have been issued. It’s possible there will be a relatively small number of additional direct deposits but it’s difficult to quantify given the aforementioned tax returns pending a manual review.

Is this refund taxable?

With tax filing season starting, several people emailed us after receiving an MCTR-related 1099-MISC in the mail. The MISC distinction typically is for “non-employee compensation” or “other income payments.” For the MCTR, these forms are going to those who received more than $600.

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Tina, a reader who asked us not to use her last name, told us that while she declined the MCTR debit card and requested a paper check from the FTB, she has yet to get a payment.

“Today we received a 1099 from the FTB for funds we did NOT receive for the tax year 2022,” she wrote. “I was not aware this was going to be taxable income. So we are now being taxed on income we did not receive. I wonder how many other taxpayers are in this same boat?”

LePage noted the MCTR payments will not be taxed by California but they “may be considered federal income.” The FTB is required to issue a 1099-MISC form for the taxable year the MCTR payment was made, he said. (Emphasis, mine.)

“Taxpayers or their tax preparers can refer to IRS Publication 525 (2022), Taxable and Nontaxable Income, to determine when the MCTR payment could be subject to tax in their situation.”

That eye-crossing 43-page document notes: “In most cases, an amount included in your income is taxable unless it is specifically exempted by law. Income that is taxable must be reported on your return and is subject to tax. Income that is nontaxable may have to be shown on your tax return but isn’t taxable.”

The IRS knows California is sending out 1099-MISC to MCTR recipients, but so far, it’s not sure whether the refunds will be taxed.

“I can tell you, we are aware of it. California is not the only state doing this,” IRS spokesman Raphael Tulino told the San Francisco Chronicle.

When determining MCTR terms, California law made it so the refund could not be distinguished as a “refund of an overpayment of income taxes.”

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Even TurboTax isn’t sure what to do with the refund, telling the Chronicle, “because the middle-class tax refund is not considered a return of taxes, it would not be taxable.”

So, there is no easy answer yet to whether or not the MCTR refunds will be taxed. Stay tuned!

If you need help

For anyone still struggling to determine their MCTR eligibility or status, be sure to call the Money Network and FTB early in the day and stay in the phone tree until you find a human who can answer your questions.

Here’s one way to check:

  • Call 1-800-240-0223
  • Press 1 for English (or 2 for Spanish)
  • Listen to options
  • Press 2 “if you have not received a payment”
  • It will ask for the last 6 digits of your Social Security number
  • Then it will ask for your ZIP code
  • It will then say “you may call us back if you have not received a payment by Jan. 31.” That means, we were told, “you’re still in line – most likely.”

For more questions, try the Money Network at 800-542-9332.

Call the Franchise Tax Board: 1-800-852-5711

The state also has a “help” page on the FTB websitewhere residents can check eligibility andhow much they’ll receive.

If all else fails, contact your California representative and have them escalate your case. They surely have good contacts in Sacramento.

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Readers, keep me posted on your MCTR progress or lack thereof at

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Is California’s Middle Class Tax Refund taxable by Uncle Sam? (3)


Is California middle class tax refund taxable by IRS? ›

At the bottom of that page the following appeared: “The California Middle Class Tax Refund (MCTR) will not be taxable on your California or Federal returns.”

Is California's middle class tax refund taxable by Uncle Sam? ›

The Middle Class Tax Refund payment is not taxable for California state income tax purposes. The Middle Class Tax Refund payment will not be subject to offset for debts owed to Franchise Tax Board or other government agencies.

Is California middle class tax refund card legitimate? ›

The Middle Class Tax Refund (MCTR) is a one-time payment to provide relief to Californians. If you are eligible, you will automatically receive a payment. Payments are expected to be issued between October 2022 and January 2023. For questions or to activate your card, visit the Contact information on this page.

What's the middle class tax refund? ›

The Middle Class Tax Refund (MCTR) is a multi-billion-dollar program approved by state lawmakers and the governor, which was meant to provide payments to taxpayers based on family size and income in response to rising gas prices and inflation.The first round of payments were issued to Californians last October.Shortly ...

Is California state tax refund considered income? ›

If you received a refund of state or local income taxes from last year's tax return, you may receive a Form 1099-G reporting this refund as income. If you itemized deductions on your federal return in the same year that you received the state or local refund, the refund may be considered taxable income.

Is a tax refund considered income California? ›

If you did not itemize deductions on your federal tax return last year, do not report any of the refund as income. However, if you itemized deductions last year and then received a refund of state or local taxes, you may have to include all or part of the refund as income on your return this year.

Who qualifies for California middle class tax refund? ›

Do I qualify for the Middle Class Tax Refund? You will need to have filed your 2020 tax return by October 10, 2021. You also cannot have been declared as a dependent. You must have been a California resident for at least 6 months in 2020 and be a California resident on the date the MCTR payment was issued.

How much is the FTB MCT refund? ›

Recipients will receive between $200 and $1,050 from the relief payments, which, for most recipients, will land directly into their bank accounts as a tax refund.

How to get cash from California middle class tax refund card? ›

Cash from a bank or credit union teller: You can use the MCTR card to withdraw cash at any bank or credit union that features a Visa logo.

Why did I receive a California middle class tax refund card? ›

California inflation relief pre-paid debit cards are being mailed out to eligible people across the state. It's one of two ways that the payments, officially called the Middle Class Tax Refund, are getting to people. The other method is via direct deposit.

Is the middle class tax refund real? ›

The Middle Class Tax Refund payment is not taxable for California state income tax purposes. However, the MCTR payments may be considered federal income.FTB says: "As such, a 1099-MISC for MCTR payments of $600 or more will be issued.

Is the middle class tax refund the same as the gas rebate? ›

The official name it ultimately got was the “'Middle Class Tax Refund.” In most cases, those terms are all referring to payments that started going out in October to offset the high price of gas and other goods.

Is California inflation relief taxable? ›

As far as California state taxes are concerned, the Middle Class Tax Refund (MCTR) is not taxable income, a FTB spokesperson told Nexstar. That means you don't need to claim your inflation relief payment — no matter the size — on your California income tax return.

Is California inflation relief taxed? ›

The state has been sending out 1099 tax forms to millions of Californians who got an inflation relief payment of $600 or more. It means they must report the income to the IRS.

Is a tax refund free money? ›

Taxpayers receive a refund at the end of the year when they have too much money withheld. If you're self-employed, you get a tax refund when you overpay your estimated taxes. While you might consider this extra income to be free money, it's actually more like a loan that you made to the IRS without charging interest.

Who gets the middle class refund? ›

Who qualifies for a Middle Class Tax Refund? California taxpayers who filed individually and made $250,000 or less were eligible, as were couples who filed jointly and made $500,000 or less. According to the Franchise Tax Board, that works out to about 25 million Californians.

Who is considered middle class in California? ›

In California's Bay Area of San Francisco, Oakland and Berkeley, families making between $77,000 and $232,000 are considered middle class. For California's Inland Empire region of Riverside, San Bernardino and Ontario, the range falls between $51,000 and $154,000.

How do I use my middle class tax refund card? ›

1 Activate your card
  1. Activate your debit Card¹, set your 4-digit PIN and get your balance by calling 1.800.240.0223.
  2. Review your Cardholder Agreement, and Fee Schedule & Transaction Limits.
  3. Sign the back of your Middle Class Tax Refund Debit Card.

Who qualifies for CA inflation relief checks? ›

You must have lived in California for at least half of the 2020 tax year and filed your state tax return by Oct. 15, 2021, to qualify. California taxpayers who filed individually and made $250,000 or less are eligible for the Middle Class Tax refund, as are couples who filed jointly and made $500,000 or less.

How many years can FTB collect? ›

Under current state law, the Franchise Tax Board (FTB) is precluded from taking collection action on tax liabilities associated with a taxable year as of the date that is 20 years after the latest tax liability for that taxable year becomes due and payable.

What is the income limit for FTB supplement? ›

FTB Part A supplement income test

To be eligible for the supplement, your family's adjusted taxable income must be $80,000 or less. The income test applies to everyone, even if you are getting an income support payment. If you're eligible for the supplement, we'll pay it to you after we balance your payments.

How to get California inflation relief checks? ›

If you believe you should have received your payment already but haven't, the FTB suggests contacting customer service at 1-800-542-9332. A customer service agent will help you confirm you qualify, explain what payment you'll receive and when.

What is middle class income in California? ›

The study defines "middle class" as earning between $47,000 to $141,000 a year. However, it says family size and location also determines the status. According to the report, "middle class" in Los Angeles, Long Beach and Anaheim is $165,000 for a family of three.

Where is my MCT refund? ›

Call our automated refund system 24 hours a day and check the status of your refund by calling 800-382-9463 (Connecticut calls outside the Greater Hartford calling area only) or 860-297-5962 (from anywhere).

What ATM can I use for Middle Class tax refund card? ›

AllPoint and MoneyPass allow you to get cash surcharge-free¹ from your California Middle Class Tax Refund Card at more than 55,000 locations.

Is the middle class tax refund the same as the Golden State stimulus? ›

The Golden State Stimulus check was a one-time check based on your 2020 tax return. It had the same eligibility criteria as the Middle Class Tax Refund with lower income limits. Your amount was either $600 or $1,200 based on your California Earned Income Tax Credit (CalEITC) eligibility and income limits.

Is the California gas rebate taxable income? ›

Franchise Tax Board:

As you mentioned, the MCTR payment is not taxable for California state income tax purposes. Taxpayers or their tax preparers can refer to IRS Publication 525 (2022), Taxable and Nontaxable Income, to determine when the MCTR payment could be subject to federal tax in their situation.

At what age do you stop paying taxes in California? ›

Single taxpayers over 65 do not need to file unless their non-social security income is over $14,250. Married taxpayers over age 65 do note need to file unless their non-social security income is over $27,800.

Is California tax friendly for seniors? ›

California offers a senior income tax exemption in addition to its personal exemption. More specifically, seniors receive an extra benefit that allows them to double the standard exemption. For the 2022 tax year, California increased the personal exemptions for all filing statuses.

Is California stimulus check taxable? ›

The law that authorized them, AB192, exempted them from state income tax. “You do not need to claim the payment as income on your California income tax return,” the Franchise Tax Board says on its website.

What sources of income are not taxed by California? ›

In accordance with federal law, the State of California does not tax retirement income received by a California nonresident after December 31, 1995. This includes, but is not limited to: IRA distributions, SEPs, Keoghs, Roth IRAs, and qualified annuities.

What income is taxable in California? ›

California Tax Brackets for Single Taxpayers
Taxable IncomeRate
$0 – $8,8091.00%
$8,809 – $20,8832.00%
$20,883 – $32,9604.00%
$32,960 – $45,7536.00%
6 more rows

Do you have to pay California tax if you don't live there? ›

As a nonresident, you pay tax on your taxable income from California sources. Sourced income includes, but is not limited to: Services performed in California. Rent from real property located in California.

Is California refund taxable in California? ›

A spokesperson for the Franchise Tax Board said — the payment is “not taxable for California purposes.”

Is an IRS refund considered taxable income? ›

If you did not itemize your deductions in the previous year, do not include the refund in income. If you deducted the taxes in the previous year, include all or part of the refund in the year you receive the refund.

Does a tax refund count as taxable income? ›

Do I have to include this as income on my federal tax return? Whether or not your state income tax refund is taxable on your federal income tax return depends on whether you took an itemized deduction (Schedule A (Form 1040)) for the tax that was later refunded.

Is California stimulus check taxable on federal return? ›

No, the state stimulus payments would be looked at similar to welfare benefits, they are not taxable on your federal return.


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