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House Passes Bill Making the Covid Rebate you got last year tax free

There are always clean up bills in the first weeks of a new session after the General Assembly does something big. It seems that last year, when the General Assembly overwhelmingly approved the 2022 Delaware Relief Rebate Program, which established a relief rebate – a one-time direct payment of $300 per Delaware resident taxpayer who filed personal income tax returns for tax year 2020 and adult residents who did not file a 2020 tax return – they forgot to exclude that money from a resident’s’ taxable gross income. That means that, absent House Bill 25, that $300 must be included in your gross income on your 2022 federal income tax return.  

Yesterday, the House of Representatives unanimously passed House Bill 25, by a vote of 37-0-4. This bill makes that rebate tax free from federal taxes.  Instead, HB25 makes the relief rebate a qualified relief payment under Section 139 of the Internal Revenue Code and is eligible to be excluded from a taxpayer’s gross income. This essentially would exempt residents from paying federal taxes on those $300 payments. 

Since the General Assembly passed and Governor John Carney signed HB 360 into law last spring, the state has sent 782,000 checks to Delawareans, with more payments being made this month. The program was designed to provide direct economic relief to hundreds of thousands of Delaware residents to address the economic hardships that rising prices at the grocery store and gas pump created. 

The program was estimated to cost more than $180 million, which was funded through a budget surplus. 

Under HB 25, as a federal declared disaster, the COVID-19 pandemic is considered a qualified disaster under the IRS Code. Funds received in connection with the pandemic could then qualify as a disaster relief payment and be excluded from a person’s gross income, saving residents from paying taxes on the $300 payment. 

HB 25 now heads to the Senate for consideration. 

House Bill 25 – Making the Covid Rebate Tax FreeCurrrent Status – Passed House 37-0-4. Sent to Senate Executive Committee 1/12/23
House SponsorsLonghurst, Schwartzkopf, Minor-Brown, Baumbach, Dorsey Walker, Harris, Heffernan // Ramone, Yeairck, Briggs King, Collins, Short, Smith, SpiegelmanSenate SponsorsTownsend, Sokola, Lockman, Hoffner, McBride, Walsh // Hocker, Pettyjohn, Lawson, RIchardson, Walsh
House Yes Votes – 37 – Baumbach Bolden Bush Carson Chukwuocha Cooke Dorsey-Walker Griffith Harris Heffernan Johnson Lambert Longhurst Lynn Matthews Minor-Brown Moore Morrison Neal Osienski Parker-Selby Phillips Romer Schwartzkopf Williams Wilson-Anton // Briggs King Collins Dukes Gray Hensley Hilovsky Morris Postles Ramone Short Shupe Smith Smyk Spiegelman Vanderwende YearickSenate Yes Votes
House No Votes – 0Senate No Votes
House Absents or Not Voting – 4 – Neal Phillips Schwartzkopf // ShupeSenate Absent or Not Voting

House Majority Leader Valerie Longhurst: “Regardless of party affiliation, we all know how hard the past couple years have been on Delaware families, both during the pandemic and our economic recovery. Rising costs have created new challenges for residents at the grocery store, at the gas pump and at the kitchen table. We did right by our residents last year in providing them with some economic relief through direct payments. Now, we are going a step further to protect them from having to pay federal taxes on those payments. It’s another move we can make to help Delawareans, and it’s the first action of what I hope are many to provide a hand up to residents in need. I’m grateful for such broad support for this measure.” 

House Minority Leader Rep. Lyndon Yearick: “The rebates were already excluded from state income tax and this bill, once enacted, will ensure that Delawareans will not owe any federal tax on the payments either. I hope we can retain the bipartisan cooperation demonstrated on this measure as we look to further help working Delawareans struggling with higher inflationary costs.” 

Senate Majority Leader Bryan Townsend: “Providing taxpayers with direct relief should make their lives easier — not harder. House Bill 25 reaffirms the original intent of the Delaware Rebate Relief Program, ensuring that the payments disbursed to Delawareans not be taxable.” 

Senate Minority Leader Gerald Hocker: “The past couple of years have been hard on Delaware families. I am proud of the work the General Assembly did in coming together and passing much needed relief to help combat rising fuel costs, inflation and the overall tough economic circumstances Delawareans found themselves in. This legislation to exempt the relief payments from federal income taxes is much needed, as well.” 

Delaware politics from a liberal, progressive and Democratic perspective. Keep Delaware Blue.

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