I have a 1099-G form for my 2017 state tax return. Am I being taxed on a tax refund? Is that legal?

[laleciamarie]

I do not understand how I can be expected to pay taxes on a tax refund from last year. Can anyone explain this to me?

[Coleen3 · Accepted solution]

If you took a state income tax deduction of $8000 on your 2017 return and then had a refund from your state of $1000, you took $1000 more state tax deduction than you were entitled to. The only way to correct this is to tax you on the $1000 the following year.

[fanfare]

not the only way, but that's how IRS handles the situation.