I received a state tax refund from my 2022 tax return, but I received it in early 2024, not in 2023. I itemized my 2022 tax return, but my state taxes paid did not (and would not have) reduced my 2022 tax bill, so the refund should not be taxed. However, when entering the 2022 refund amount in Turbo Tax for 2024 (since that's when the refund was received, plus I received a 1099G for the 2022 refund for tax year 2024), Turbo Tax treats it as income. It does not seem to look back to my 2022 return to make the determination as to whether it is taxable. It appears to simply add it to my income. I entered the refund in my 2023 Turbo Tax return to test it, and it appropriately is not taxed in the 2023 return. This seems incorrect & arbitrary. Am I missing something, or is this a quirk of the software (or of the federal tax system)? Put another way, assuming Turbo Tax is correct, and it should be treated as income for 2024, if I had received the refund on 12/31/23 it would not be taxed. But if received one day later on 01/01/24, it would be taxed. Please help me figure out if Turbo Tax is wrong or if this is an arbitrary quirk that I have to live with. Thank you!
