Your state refund will either be fully taxable or even partially taxable depending upon how much the deduction affected your refund or tax liability.
All 3 of the following must be true:
- You itemized deductions last year
- You claimed state and local income taxes
- Claiming the deduction helped you increase your federal refund or lower your tax bill
If all of the above applies for you, review your input to ensure the refund is entered in the correct place in the program:
- Select Federal
- Select Income & Expenses
- Select Other Common Income
- Select Refunds Received for State/Local Tax Returns
- Proceed to enter the information and answer all of the questions
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