Alabama could tax some coronavirus stimulus checks

Stimulus checks may not be exempt from state taxes

MONTGOMERY, Ala. (WSFA) - Americans are looking forward to their coronavirus stimulus payments as thousands of people struggle to pay their bills. But this money may not be exempt from being taxed by the state when people file in 2021.

Sen. Chris Elliott, R-Daphne, is drafting a bill to exclude the federal stimulus package from state income taxes.

“The point of the stimulus is to get money into people’s pockets and I think that adding an income tax on top of that is just antithetical," Elliott said. “We don’t want to hit them with a tax burden when they go to file their taxes.”

The State Department of Revenue said that money could potentially be included in the calculation of Alabama taxable income depending on income level and deductions.

Elliott said people could be taxed around 5 percent which would mean $60 is taken out of that $1,200 check.

“I think folks are more anxious about getting the money in their account so that they can get some relief from what is obviously a very hard financial time right now. I don’t think that they expect that this money will be taxed by the state,” Elliott said.

He wants the bill to also exclude forgivable small business loans from the tax. Small businesses have applied for the Paycheck Protection Program loan (PPP).

Rosemary Elebash is the state director for National Federation of Independent Business (NFIB) Alabama. She supports exempting the loans from being taxed by the state.

“It’s just another burden and huge barrier that they have to face when you have businesses that are shuttered for this period of time,” she said. “Then reopening is not unlocking the door and turning on the lights. It’s gonna be a very long, rocky road.”

Alabama’s legislative session has been postponed due to COVID-19. Lawmakers at this point in time plan to return April 28 until May 18.

“There will be a very few number of bills that actually make it through the session, especially if they haven’t been filed yet,” Elliot said. “I do think that this will be one of those priority bills that deals with the, you know, small businesses to deal with the economic hardship of individuals.”

The State Department of Revenue said they haven’t seen how the IRS will set up this program and treat the payments so they do not know if there is any across-the-board category in which there is no effect on Alabama’s tax liability.

Here are some key notes of the Stimulus Bill:

  • Tax filers with adjusted gross income up to $75,000 for individuals and up to $150,000 for married couples filing joint returns will receive the full payment.
  • Parents with children who are 16 years old and younger will receive $500 per child.
  • If you are on unemployment assistance, you will get another $600 per week on top of the amount your state already pays.
  • The income levels are based on tax returns for 2019. For those who have not yet filed their taxes this year, it will be based on 2018 returns.
  • The vast majority of people do not need to take any action. The IRS will calculate and automatically send the economic impact payment to those eligible.
  • Click here for more FAQs answered by the IRS

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