Exemption of Income Tax Refunds

I received an interesting question about whether Florida Statute 222.25(3) exempts all income tax refunds.The statute exempts a debtor’s interest in a refund or a credit from a financial institution pursuant to s. 32 of the Internal Revenue Code. I looked up Section 32 of the Revenue Code and found that it applies to the earned income tax credit. Earned income tax credits are exempt from creditors, and in bankruptcy, any portion of a debtor’s tax refund which comes from the earned income credit is not part of the bankruptcy estate. All other income tax refunds are non-exempt and are subject to levy by general judgment creditors and bankruptcy trustees.

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Jon Alper is an expert in asset protection planning for individuals and small businesses.

Jon Alper

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