State tax refunds from a prior year may be taxable on your federal tax return if you itemized deductions in that prior year.
- If you Itemized your deductions last year, you may have taken the full amount of your state withholdings as a deduction.
- If so your deduction was too large.
- The IRS wants you to recalculate your taxes based on the adjusted amount.
This is fund under
- Wages & Income
- Other common income
- Refunds Received for State/Local Tax Returns
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