1099 G from Oregon

[al56]

In July of 2019, I filed amended Federal and State (Oregon) returns for tax year 2017.  As a result, I received some refunds from Federal and State.  Oregon sent me a 1099-G with the refund amount.  Is this taxable income?

[hbl3973 · Accepted solution]

If your 2017 amended federal tax return claimed itemized deductions rather than the standard deduction, then, yes, at least some, and in most case all, of that state tax refund is considered 2019 taxable income. If that is the case, to determine how much of the refund is taxable you will calculate the difference between your 2017 itemized deductions and your 2017 standard deduction and report the lesser of that number and your 1099-G tax refund.  If you claimed the federal standard deduction then the refund is not a taxable item.

The basic idea is that an itemizer is required to list all state and local taxes on their Schedule A and therefore was required to subtract more state and local tax than was actually paid in the end.  The IRS handles this by adding back the amount of the over-deduction to income in the year the refund was received.

[al56]

Thank you.  Your explanation is very clear.

[JotikaT2]

It depends.

Your state refund will either be fully taxable or even partially taxable depending upon how much the deduction affected your refund or tax liability.

All 3 of the following must be true:

• You itemized deductions last year
• You claimed state and local income taxes
• Claiming the deduction helped you increase your federal refund or lower your tax bill

If all of the above applies for you, review your input to ensure the refund is entered in the correct place in the program:

1. Select Federal
2. Select Income & Expenses
3. Select Other Common Income
4. Select Refunds Received for State/Local Tax Returns
5. Proceed to enter the information and answer all of the questions