Yes, the NYS Inflation Refund is generally considered taxable income on your Federal return if you itemize, but it is not taxable on your New York State return. If you itemized in 2023 and 2024, you need to report it. Here is how to report in TurboTax.
- Go to the Federal section in the left-hand menu.
- Select Wages & Income.
- Scroll down to the Other Common Income section and find Refunds Received for State/Local Tax Returns (1099-G). Click Start or Revisit.
- When asked "Did you get a state or local tax refund in 2025?", click Yes.
- Enter the information exactly like this:
- State: New York
- Tax Year: 2023 (This is critical, as the refund was based on 2023 data).
- Total Refund: Enter the full amount from your 1099-G.
- Total Payments and Withholding: Enter $0 (unless you have a different 1099-G specifically for a tax overpayment).
- The "Trick" Question: You will see a screen asking "Does either apply to your 2023 New York return?"
- Select NO. * Even though you itemized, selecting "No" forces TurboTax to treat this as taxable Federal income while still identifying it as an NY adjustment.
- Taxable Amount: On the following screen, enter the full amount of the refund as the taxable amount.
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