I received a 1099G from overpaying my state. However, I I didn't owe the state to begin with. Do I still have report it on the U.S. 1040?

[ChristinaS · Accepted solution]

Yes- if you itemized your deductions on your 2015 federal Schedule A and took a deduction for the state tax withholding.

If you withheld these state's taxes in 2015, you would still have itemized that on your federal return. The fact that you got a full refund would not have impacted your ability to deduct these taxes.

You do have to pay tax on what you recovered in 2016, and deducted on last year's return.