If it says that I got a $3000 renter’s deduction on my state taxes, what does that actually mean?

[SweetieJean]

Which state? $3000 sounds high.

[AnthonyC]

Likely Indiana ... but I didn't want to assume

<a rel="nofollow" target="_blank" href="http://www.in.gov/dor/5863.htm#renters">http://www.in.gov/dor/5863.htm#renters</a>

[AnthonyC]

It means you will receive a $3,000 deduction from your state income when computing your tax liability.  Here's an example of how this could impact your state taxes.  You have $50,000 in income before the deduction and say your state has a 5% tax rate.  Instead of paying taxes on that full $50,000, you get to subtract $3,000 before the 5% tax rate is applied.  So, your tax due will be $2,350 ($47,000 * 5%) instead of $2,500 ($50,000 *5%).  So, the deduction saved you $150 in tax due.  

What it does not mean is that you will get a full $3,000 refund to you.   Your actual savings will only be a small portion of the deduction.  And, its possible you may not see any impact if you already have other deductions or credits that have reduced your tax due to zero.