whether a state income tax refund is taxable is quite complicated. first you must have itemized and deducted state income taxes for that year. if you took a deduction for sales tax instead, it isn't taxable. if you paid alternative minimum tax some or all of the refund may not be taxable. if you paid some of the taxes after 12/31 of the tax year, part may taxable and part non-taxable. if you paid and deducted say $2,000 in state income taxes, got a refund of $500 but your sales tax deduction would have been $1,800, only $200 would be taxable. there are even more complicated situations
