Many farmers and other taxpayers received a $1,200 personal stimulus payment in 2020 and a $600 payment in 2021.
For federal income tax purposes, this is not considered taxable income and most states will also considered it not to be taxable income. However, there is a “gotcha”. Most states allow you to either deduct all or a portion of your federal income taxes that you owe.
Since the stimulus payment is considered a credit against your income tax, it will reduce the amount of federal income tax allowed on your state income tax return.
This means that even though it is not considered income for state income tax purposes, it will still “increase” your state income taxes in most states.
The increase is likely fairly minor, but you should be aware that the federal tax deduction is after the credit including the amount you just received in 2021. If the $1,400 additional credit gets put into law you will have the same type adjustment when you file your 2021 income tax return.
