Solved: Is interest received as part of a state income tax refund taxable?
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New Member

Is interest received as part of a state income tax refund taxable?

 
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Level 15

Is interest received as part of a state income tax refund taxable?

Yes.  You need to enter it under Interest like if you got a 1099int for it and put the interest in box 1.

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Level 15

Is interest received as part of a state income tax refund taxable?

Yes.  You need to enter it under Interest like if you got a 1099int for it and put the interest in box 1.

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New Member

Is interest received as part of a state income tax refund taxable?

Why? Isn't the interest paid from a state government obligation?
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Level 15
Level 15

Is interest received as part of a state income tax refund taxable?

The term "obligation" is somewhat ambiguous. It normally means a bond issued by the state, though it can sometimes mean other types of obligations. Here are two statements from IRS Publication 550.

"Interest on some state or local obligations is taxable." (page 12)
"Interest you receive on tax refunds is taxable income." (page 6)
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Level 7

Is interest received as part of a state income tax refund taxable?

26 USC 103 specifically mentions/state state or local bonds.  Interest on a late tax refund is not a bond or other acceptable obligation
**Disclaimer: Effort has been made to offer correct information; but due to the discussion forum limitations, the poster disclaims any legal responsibility for the accuracy of the poster's response**
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New Member

Is interest received as part of a state income tax refund taxable?

do we record interest received as part of a state income tax refund in schedule B?
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Level 15
Level 15

Is interest received as part of a state income tax refund taxable?

@reyna8 - As VolvoGirl said above, you enter the interest in TurboTax as if you had gotten a Form1099-INT with the interest in box 1. TurboTax will report it in the appropriate place in your tax return. Schedule B is only included in your tax return in certain cases.
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New Member

Is interest received as part of a state income tax refund taxable?

In the "Received from" field in TurboTax , do I write  Internal Revenue Service? Thanks
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Level 15

Is interest received as part of a state income tax refund taxable?

No. You put down who paid you. Sounds like it was from your state. Just put State of .... interest.
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New Member

Is interest received as part of a state income tax refund taxable?

And if it was State of California, I put California Franchise tax Board, right? Thanks much VolvoGirl
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Level 15

Is interest received as part of a state income tax refund taxable?

Yep that's what I put down on mine from California.
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