If all three of the following are true, your refund counts as taxable income(may not be the entire amount):
- 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.
TurboTax will calculate the taxable amount when you answer the questions about last year's refund.
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