My 2015 state tax deduction was $7,220. My state tax refund was $677 in 2016. I have included as a refund on my 2016 return, but my form 1040 shows 0 on line 10. Why?

[mtkelly5]

I do not understand why the refund from prior year is not taxable.

[KrisD · Accepted solution]

You may have used the sales tax deduction as the option to deduct state tax in 2015.

Schedule A line 5b.

If that was the case, or if you took the standard deduction in 2015, the refund is not taxable in 2016.