You will report last year’s state or local tax refund, and TurboTax will ask you some questions to figure out if it’s taxable or not.
If all three of the following are true, your refund counts as taxable income:
- You itemized deductions last year, instead of taking the standard deduction.
- You claimed state and local income taxes (not general sales taxes).
- Claiming the deduction helped you increase your federal refund or lower your tax bill.
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