Was the first federal COVID-19 economic impact payment taxable income for South Carolina income-tax purposes?

Plain-English summary

South Carolina said the first federal COVID-19 economic impact payment was not taxable income for either federal or South Carolina individual-income-tax purposes.

The CARES Act payment was structured as an advance payment of a new refundable federal credit for tax year 2020 under I.R.C. § 6428. Because it was not included in federal gross income, the IRS did not treat it as taxable income. The letter also said the payment would not reduce a taxpayer's refund or increase the amount owed when the 2020 federal return was filed.

For South Carolina, the payment likewise was not included in taxable income. The Department explained that federal income-tax refunds—and the stimulus payment in the form of a rebate or refundable credit—were not included in arriving at South Carolina taxable income.

The historical first-round amount was $1,200 per adult, $2,400 for a married couple filing jointly, plus $500 for each qualifying child age 16 or younger, subject to income limits.

What this means for you

Individuals who received the first 2020 stimulus payment

The payment itself did not create South Carolina taxable income under this letter.

Tax return preparers

Treat the payment according to the specific federal program that created it. This letter covers the CARES Act payment under I.R.C. § 6428, not every later federal relief payment.

People worried about a smaller federal refund

The letter said the advance credit would not reduce the refund or increase the tax due when the 2020 federal return was filed.

Common questions

Q: Was the payment taxable by South Carolina?
A: No.

Q: Was it taxable federally?
A: No. It was not included in federal gross income.

Q: Was the payment technically a tax credit?
A: Yes. The letter describes it as an advance payment of a temporary refundable credit for tax year 2020.

Q: Does this letter decide the treatment of every later stimulus payment?
A: No. It addresses the first CARES Act economic impact payment.

Citations and references

• I.R.C. § 6428, including § 6428(b)
• CARES Act § 2201(a), Public Law 116-136
• S.C. Code Ann. §§ 12-4-320 and 1-23-10(4)
• SC Revenue Procedure #09-3

Source

• Landing page: https://dor.sc.gov/advisory-opinion-search
• Original PDF: https://dor.sc.gov/sites/dor/files/policies/IL20-13.pdf

Original ruling text

STATE OF SOUTH CAROLINA

DEPARTMENT OF REVENUE
300A Outlet Pointe Blvd., Columbia, South Carolina 29210
P.O. Box 125, Columbia, South Carolina 29214-0575

SC INFORMATION LETTER #20-13

SUBJECT:

Federal COVID-19 Economic Stimulus Payments
(Individual Income Tax)

DATE:

June 11, 2020

AUTHORITY:

S.C. Code Ann. Section 12-4-320 (2014)
S.C. Code Ann. Section 1-23-10(4) (2005)
SC Revenue Procedure #09-3

SCOPE:

An Information Letter is a written statement issued to the public to announce
general information useful in complying with the laws administered by the
Department. An Information Letter has no precedential value.

OVERVIEW OF FEDERAL ECONOMIC IMPACT PAYMENT
On March 27, 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security Act
(CARES Act) 1 in response to the COVID-19 pandemic. As part of the relief provided, the
Internal Revenue Service (IRS) is issuing an economic impact payment to individual taxpayers
from April through December 2020. 2 The stimulus payment is $1,200 per adult ($2,400 for
married couples filing joint returns) plus $500 for each qualifying child age 16 and under. The
payment is not available to higher income individuals.
The IRS is distributing stimulus payments automatically, with no action required for individuals
who filed a 2018 or 2019 federal income tax return 3 or for individuals not required to file a tax
return who receive government payments, such as social security or veteran’s benefits. Other
individuals may have to provide additional information to the IRS to receive a stimulus payment.
For complete information about the federal economic impact payment, go to the “Economic
Impact Payment Information Center” page on IRS.gov.
1

Public Law 116-136, March 27, 2020.
See Internal Revenue Code Section 6428, “2020 Recovery Rebates for Individuals,” as added by
CARES Act Section 2201(a).
3
Because of the pandemic, the April 15, 2020 individual income tax filing deadline was extended to July
15, 2020, and some 2019 individual returns have not been filed at the time the IRS sent the stimulus
payment.
2

1

TAX CONSEQUENCES OF ECONOMIC IMPACT PAYMENT IN TAX YEAR 2020
Federal Tax Treatment. According to the IRS, the economic impact payment is not considered
taxable income. It is not included in gross income for federal income tax purposes and is not
subject to federal income taxes. It is treated as a refundable credit for the 2020 tax year 4 and will
not reduce a taxpayer’s refund or increase the amount owed when the 2020 individual federal
income tax return is filed next year.
South Carolina Tax Treatment. For South Carolina income tax purposes, the economic impact
payment is not taxable. Since federal income taxes are not deductible in arriving at an
individual’s South Carolina taxable income, the federal income tax refund (or the stimulus
payment in the form of a rebate or refundable tax credit) is not includable in arriving at South
Carolina taxable income.

4

The stimulus payment is technically an advance payment of a new temporary tax credit that eligible taxpayers can
claim in their 2020 federal tax return. See Internal Revenue Code Section 6428(b) as added by CARES Act Section
2201(a).

2