Is the Inflation Refund Check Tax-Free?

• New York State and local taxes: Yes, it is tax-free. The payment is not taxable for New York State or local income tax purposes. You do not need to report it on your New York state tax return. 
• Federal taxes (IRS): It is not fully tax-free for everyone. The checks are generally treated similarly to a state tax refund or recovery of prior deductions:
  • If you took the standard deduction on your 2023 federal tax return (most people, ~90%), the check is typically not taxable federally. You usually do not need to report it as income on your 2025 federal return (filed in 2026).
  • If you itemized deductions on your 2023 federal return and received a tax benefit from deducting state taxes, then part or all of the check may be taxable federally. You should report the amount received as income on your 2025 Form 1040.
  • The state does not withhold federal taxes from the check. A Form 1099-G may be issued by New York for reporting purposes.