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Solved

Is state income tax refund always counted as income

Forum|Forum|7 years ago
June 1, 2019
1 reply
12 views

In 2015 I was never a resident of Michigan, and had zero income in MI. But I mistakenly had withholding deducted for the wrong state (MI). The mutual fund company could not back out the transaction and advised I file a return to get it (Zero income and 1224 withheld) This year 1224 is being shown as income

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Best answer by AnnaB

No, it only becomes taxable income if you itemized your deductions in the prior year and received a tax benefit for state taxes paid. Since the amounts were paid during 2015, then they would be included in Schedule A as a deduction (unless you claim state sales tax paid). Therefore, when you receive a refund, you must recover this deduction as income in the year received.

AnnaBAnswer

Level 7

No, it only becomes taxable income if you itemized your deductions in the prior year and received a tax benefit for state taxes paid. Since the amounts were paid during 2015, then they would be included in Schedule A as a deduction (unless you claim state sales tax paid). Therefore, when you receive a refund, you must recover this deduction as income in the year received.