If it is a federal tax refund it is not taxable. If it is a state tax refund, it could be taxable. If you itemized deductions (which it sounds like you did) a state tax refund could be taxable. According to the IRS:
As a general rule, taxpayers who choose the standard deduction on their federal income tax returns do not owe federal income tax on state tax refunds.
Taxpayers who itemize their deductions on their federal income tax returns and receive a state tax refund must include the refund in income only if they deducted the state tax paid. Because of the $10,000 limit on itemized deductions for state income and property taxes, some itemizers are not able to deduct all of the state taxes they paid and do not need to include a refund in income.
If you are referring to a refund or "recovery" of an amount you deducted or took a credit for in an earlier year, the Tax Benefit Rule would apply.
Tax benefit rule.
You must include a recovery in your income in the year you receive it up to the amount by which the deduction or credit you took for the recovered amount reduced your tax in the earlier year. For this purpose, any increase to an amount carried over to the current year that resulted from the deduction or credit is considered to have reduced your tax in the earlier year.
For more information see Tax Benefit Rule in IRS Publication 525
[Edited March 18, 2025, 2:35 PDT]
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