Welfare and Other Public Assistance Benefits: Taxable and Nontaxable Income (2025 IRS Guide)

This guide covers “Welfare and Other Public Assistance Benefits” within taxable and nontaxable income. The following material presents the IRS treatment of this topic, including the qualifications, exceptions, and examples in the source section. Read the rules alongside the facts of your own situation before deciding what to report, deduct, or document.

Adapted from Publication 525 (2025), Taxable and Nontaxable Income, published by the Internal Revenue Service. This guide retains the source edition’s years, amounts, deadlines, and examples. It is guidance for that edition, not a statement that the same figures apply to every tax year.

Context for these rules

This section discusses various types of income. You may have taxable income from certain transactions even if no money changes hands. For example, you may have taxable income if you lend money at a below-market interest rate or have a debt you owe canceled.

Welfare and Other Public Assistance Benefits

Don’t include in your income governmental benefit payments from a public welfare fund based upon need, such as payments due to blindness. Payments from a state fund for the victims of crime shouldn’t be included in the victims’ incomes if they’re in the nature of welfare payments. Don’t deduct medical expenses that are reimbursed by such a fund. You must include in your income any welfare payments that are compensation for services or that are obtained fraudulently.

Work-training program.

Payments you receive from a state welfare agency for taking part in a work-training program aren’t included in your income, as long as the payments (exclusive of extra allowances for transportation or other costs) don’t total more than the public welfare benefits you would have received otherwise. If the payments are more than the welfare benefits you would have received, the entire amount must be included in your income as wages.

Reemployment Trade Adjustment Assistance (RTAA) payments.

Payments you receive from a state agency under the RTAA must be included in your income. The state must send you Form 1099-G to advise you of the amount you should include in income. The amount should be reported on Schedule 1 (Form 1040), line 8z.

Persons with disabilities.

If you have a disability, you must include in income compensation you receive for services you perform unless the compensation is otherwise excluded. However, you don’t include in income the value of goods, services, and cash that you receive, not in return for your services, but for your training and rehabilitation because you have a disability. Excludable amounts include payments for transportation and attendant care, such as interpreter services for the deaf, reader services for the blind, and services to help individuals with an intellectual disability do their work.

Disaster relief grants.

Don’t include post-disaster grants received under the Disaster Relief and Emergency Assistance Act in your income if the grant payments are made to help you meet necessary expenses or serious needs for medical, dental, housing, personal property, transportation, or funeral expenses. Don’t deduct casualty losses or medical expenses that are specifically reimbursed by these disaster relief grants. If you have deducted a casualty loss for the loss of your personal residence and you later receive a disaster relief grant for the loss of the same residence, you may have to include part or all of the grant in your taxable income. See Recoveries, earlier. Unemployment assistance payments under the Act are taxable unemployment compensation. See Unemployment compensation under Unemployment Benefits, earlier.

Disaster relief payments.

You can exclude from income any amount you receive that is a qualified disaster relief payment. A qualified disaster relief payment is an amount paid to you:

1. To reimburse or pay reasonable and necessary personal, family, living, or funeral expenses that result from a qualified disaster;

2. To reimburse or pay reasonable and necessary expenses incurred for the repair or rehabilitation of your home or repair or replacement of its contents to the extent it’s due to a qualified disaster;

3. By a person engaged in the furnishing or sale of transportation as a common carrier because of the death or personal physical injuries incurred as a result of a qualified disaster; or

4. By a federal, state, or local government; or agency or instrumentality in connection with a qualified disaster in order to promote the general welfare.

You can exclude this amount only to the extent any expense it pays for isn’t paid for by insurance or otherwise. The exclusion doesn’t apply if you were a participant or conspirator in a terrorist action or a representative of one.

A qualified disaster is:

• A disaster that results from a terrorist or military action;

• A federally declared disaster; or

• A disaster that results from an accident involving a common carrier, or from any other event, which is determined to be catastrophic by the Secretary of the Treasury or their delegate.

For amounts paid under (4), a disaster is qualified if it’s determined by an applicable federal, state, or local authority to warrant assistance from the federal, state, or local government, agency, or instrumentality.

Disaster mitigation payments.

You can also exclude from income any amount you receive that is a qualified disaster mitigation payment. Qualified disaster mitigation payments are commonly paid to you in the period immediately following damage to property as a result of a natural disaster. However, disaster mitigation payments are used to mitigate (reduce the severity of) potential damage from future natural disasters. They’re paid to you through state and local governments based on the provisions of the Robert T. Stafford Disaster Relief and Emergency Assistance Act or the National Flood Insurance Act.

You can’t increase the basis or adjusted basis of your property for improvements made with nontaxable disaster mitigation payments.

Disaster relief payments from wildfires.

You may be able to exclude from income any amount received as a qualified wildfire relief payment. Qualified wildfire relief payments are amounts received by or on behalf of an individual as compensation for expenses or losses incurred as a result of a qualified wildfire disaster. A qualified wildfire disaster is any federally declared disaster declared, after December 31, 2014, as a result of any forest or range fire. See Pub. 547 for more information.

Disaster relief payments from the East Palestine train derailment.

You may be able to exclude from income any amount received as a result of the East Palestine, Ohio, train derailment that occurred on February 3, 2023, that qualifies as an “East Palestine train derailment payment.” The payment may be made by a government agency, Norfolk Southern Railway, or its subsidiary, insurer, agent, or a related person. For more information, and to find out what qualifies as an “East Palestine train derailment payment,” see Pub. 547.

Home Affordable Modification Program (HAMP).

If you benefit from Pay-for-Performance Success Payments under HAMP, the payments aren’t taxable.

Hardest Hit Fund and Emergency Homeowners’ Loan Program.

If you receive or benefit from payments made under:

• A State Housing Finance Agency (State HFA) Hardest Hit Fund program in which program payments can be used to pay mortgage interest;

• An Emergency Homeowners’ Loan Program (EHLP) administered by the Department of Housing and Urban Development (HUD) or a state; or

• The Homeowner Assistance Fund (HAF) program in which program payments are used to provide financial assistance to eligible homeowners for purposes of paying certain expenses related to their principal residence to prevent mortgage delinquencies, defaults, foreclosures, loss of utilities or home energy services, and also displacements of homeowners experiencing financial hardship after January 21, 2020,

the payments aren’t included in gross income and aren’t taxable.

For more details about the HAF program, go to Home.Treasury.gov/Policy-Issues/Coronavirus/Assistance-for-State-Local-and-Tribal-Governments/Homeowner-Assistance-Fund.

If you’re a tribal member and need more details about the HAF program, go to IRS.gov/Newsroom/FAQs-for-Payments-by-Indian-Tribal-Governments-and-Alaska-Native-Corporations-to-Individuals-Under-Covid-Relief-Legislation.

Mortgage assistance payments under section 235 of the National Housing Act.

Payments made under section 235 of the National Housing Act for mortgage assistance aren’t included in the homeowner’s income. Interest paid for the homeowner under the mortgage assistance program can’t be deducted.

Replacement housing payments.

Replacement housing payments made under the Uniform Relocation Assistance and Real Property Acquisition Policies Act for Federal and Federally Assisted Programs aren’t includible in gross income but are includible in the basis of the newly acquired property.

Relocation payments and home rehabilitation grants.

A relocation payment under section 105(a)(11) of the Housing and Community Development Act made by a local jurisdiction to a displaced individual moving from a flood-damaged residence to another residence isn’t includible in gross income. Home rehabilitation grants received by low-income homeowners in a defined area under the same Act are also not includible in gross income.

Indian financing grants.

Nonreimbursable grants under title IV of the Indian Financing Act of 1974 to Indians to expand profit-making Indian-owned economic enterprises on or near reservations aren’t includible in gross income.

Indian general welfare benefit.

Gross income doesn’t include the value of any Indian general welfare benefit. “Indian general welfare benefit” includes any payment made or services provided to or on behalf of a member (or any spouse or dependent of that member) of an Indian tribe or Alaska Native Corporation under an Indian tribal government program but only if:

1. The program is administered under specified guidelines and doesn’t discriminate in favor of members of the governing body of the Indian tribe or Alaska Native Corporation; and

2. The benefits provided under the program (a) are available to any tribal member who meets guidelines, (b) are for the promotion of general welfare, (c) aren’t lavish or extravagant, and (d) aren’t compensation for services.

Generally, any items of cultural significance, reimbursement of costs, or cash honorarium for participation in cultural or ceremonial activities for the transmission of tribal culture aren’t treated as compensation for services.

Note:

The above exclusion was enacted by the Tribal General Welfare Exclusion Act of 2014, September 26, 2014. The exclusion applies to tax years for which the statute of limitations on refund or credit under section 6511 has not expired (generally, within 3 years from the time the return was filed or 2 years from the time the tax was paid, whichever expires later). Additionally, a claim for the above exclusion will be allowed if made within 1 year of the enactment of the exclusion.

Note:

The enactment of the above exclusion generally codifies the exclusion afforded under Revenue Procedure 2014-35, June 4, 2014. See Revenue Procedure 2014-35 for more details.

Medicare.

Medicare benefits received under title XVIII of the Social Security Act aren’t includible in the gross income of the individuals for whom they’re paid. This includes basic (Part A (Hospital Insurance Benefits for the Aged)) and supplementary (Part B (Supplementary Medical Insurance Benefits for the Aged)).

Social security benefits (including lump-sum payments attributable to prior years), Supplemental Security Income (SSI) benefits, and lump-sum death benefits.

The Social Security Administration (SSA) provides benefits such as old-age benefits, benefits to disabled workers, and benefits to spouses and dependents. These benefits may be subject to federal income tax depending on your filing status and other income. See Pub. 915 for more information. An individual originally denied benefits, but later approved, may receive a lump-sum payment for the period when benefits were denied (which may be prior years). See Pub. 915 for information on how to make a lump-sum election, which may reduce your tax liability. There are also other types of benefits paid by the SSA. However, SSI benefits and lump-sum death benefits (one-time payment to spouse and children of deceased) aren’t subject to federal income tax. For more information on these benefits, go to SSA.gov.

Form SSA-1099.

If you received social security benefits during the year, you’ll receive Form SSA-1099, Social Security Benefit Statement. An IRS Notice 703 will be enclosed with your Form SSA-1099. This notice includes a worksheet you can use to figure whether any of your benefits are taxable.

For an explanation of the information found on your Form SSA-1099, see Pub. 915.

Form RRB-1099.

If you received equivalent railroad retirement or special guaranty benefits during the year, you’ll receive Form RRB-1099, Payments by the Railroad Retirement Board.

For an explanation of the information found on your Form RRB-1099, see Pub. 915.

Joint return.

If you’re married and file a joint return, you and your spouse must combine your incomes and your social security and equivalent railroad retirement benefits when figuring whether any of your combined benefits are taxable. Even if your spouse didn’t receive any benefits, you must add your spouse’s income to yours when figuring if any of your benefits are taxable.

Taxable amount.

Use the worksheet in the Instructions for Form 1040 to determine the amount of your benefits to include in your income. Pub. 915 also has worksheets you can use. However, you must use the worksheets in Pub. 915 if any of the following situations apply.

• You received a lump-sum benefit payment during the year that is for one or more earlier years.

• You exclude employer-provided adoption benefits or interest from qualified U.S. savings bonds.

• You take the foreign earned income exclusion, the foreign housing exclusion or deduction, the exclusion of income from American Samoa, or the exclusion of income from Puerto Rico by bona fide residents of Puerto Rico.

Benefits may affect your IRA deduction.

You must use the special worksheets in Appendix B of Pub. 590-A to figure your taxable benefits and your IRA deduction if all of the following conditions apply.

• You receive social security or equivalent railroad retirement benefits.

• You have taxable compensation.

• You contribute to your IRA.

• You or your spouse is covered by a retirement plan at work.

How to report.

If any of your benefits are taxable, you must use Form 1040 or 1040-SR to report the taxable part. Report your net benefits (as shown on your Forms SSA-1099 and RRB-1099) on line 6a of Form 1040 or 1040-SR. Report the taxable part on line 6b of Form 1040 or 1040-SR. If you elect to use the lump-sum election method, check the box on line 6c of Form 1040 or 1040-SR and see the instructions.

Nutrition Program for the Elderly.

Food benefits you receive under the Nutrition Program for the Elderly aren’t taxable. If you prepare and serve free meals for the program, include in your income as wages the cash pay you receive, even if you’re also eligible for food benefits.

Payments to reduce cost of winter energy.

Payments made by a state to qualified people to reduce their cost of winter energy use aren’t taxable.

Using the guidance

Keep the documents that establish the dates, amounts, and circumstances described above. References to other chapters, forms, worksheets, or earlier and later sections refer to the linked IRS publication. Check the full publication and its updates before relying on a rule for a different tax year or a situation not addressed here.

Sources and further reading

• Publication 525 (2025), Taxable and Nontaxable Income: Miscellaneous Income — Welfare and Other Public Assistance Benefits — Internal Revenue Service; 2025 edition.

The cited U.S. government text is in the public domain. Source accessed October 28, 2026. Fynoptic has organized this material for educational use and is independent of, and not endorsed by, the IRS.