It is possible that the full amount of your state tax refund is not taxable on your federal tax return. It would only be taxable to the extent it was deducted in a previous year on your federal tax return. The state tax deduction can be limited, as you can only deduct up to $10,000 of state income/sales tax and property taxes on your federal tax return as a component of your itemized deductions. You can look at line 7 of your schedule A from the previous year to see how much of your state tax was deducted. That may help you determine if the full $250 of state tax refund is taxable in the current tax year.
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