Minnesota’s rebate checks will be taxed federally, IRS decides

After months of questions, the federal government says it will officially tax the rebate checks sent out by the state of Minnesota earlier this year.

The one-time rebate payments totaled $260 per eligible person, with families also qualifying for an extra $260 per dependent, up to three, meaning Minnesotans could’ve received up to $1,300.

While Minnesota isn’t taxing the payments, the IRS has now determined that the payments will be taxed federally. Depending on Minnesotans’ income and the size of their rebate check, the federal tax could take between $26 and $286 of the rebate.

Federal Marginal Bracket (2023)10%12%22%
Amount of Rebate Payment   

The Minnesota Department of Revenue says it will be sending a 1099-MISC form to everyone who got a rebate — around 2.1 million Minnesotans — to use when filing taxes next year. The agency notes that those who include the rebate on their federally adjusted gross income should subtract it from their Minnesota taxable income on line 33 on their Minnesota return.

When asked about it Wednesday afternoon, Gov. Tim Walz bluntly called it “bull****”. The governor said he has been talking to federal officials, saying that Minnesota is being treated unfairly because other states weren’t taxed on their rebates, but the result left him “deeply disappointed.”