Are IRS Refunds Ever Taxed by States

[Boombaby99]

Are federal refunds counted as taxable income in any states?

[xmasbaby0]

There are a few states in which your federal refund might be taxed:

Alabama, Iowa. Missouri, Montana, and Oregon.  I

[SteamTrain]

Possibly...depends on the state.

There are a couple of states (3 or 4...or??)  that allow a state income deduction for taxes paid to the IRS in one year, and if you get a IRS refund, then it becomes a State income item the next.

Please, always indicate what state you are dealing with...we don't know in this public forum unless you tell us.

[Boombaby99]

I was just curious if any states ever taxed it. I've never heard of such a thing before until I read online that sometimes you have to report your federal refund on your state taxes and was curious when this would ever happen to someone. This was a general site, not state specific. 

[Boombaby99]

I don't live in any of those states. That must be why I've never heard of that. I've been in PA most of my life.

[hgsmoth]

California is one of those states. They send you a 1099-G for any state refund you get. So you keep getting taxed on income you haven't made for years and the 1099 costs you more to file. It's just awful.

[VolvoGirl]

@hgsmoth This thread is about the opposite.....a Federal Refund being taxed by the state.    You replied about a California state refund which can be taxed by the federal.  All refunds for any state can be taxed on the federal return if you didn't take the Standard Deduction on Federal.  If you took the Standard Deduction you don't even need to enter a 1099G state refund.  

[xmasbaby0]

@hgsmoth Any state that sent you a state refund sends or issues a 1099G for the refund.   Or you could get a 1099G for a local tax refund.   The confusion lies in whether the state or local refund is taxable on your federal return the next year.  The state is not taxing your state refund and CA is not taxing your federal refund.

[xmasbaby0]

IS MY 2023 STATE OR LOCAL REFUND TAXABLE?

If you used standard deduction for your 2023 tax return, you do not have to enter a state or local tax refund you received in 2024.   If you itemized deductions then your state or local refund that you claimed on the 2023 return----and received in 2024---must be entered as taxable income on your 2024 return.  If you  are not sure if you itemized for 2023, look at your 2023 Form 1040 line 12.   Do you see the standard deduction amount or something else?

2023 STANDARD DEDUCTION AMOUNTS

SINGLE $13,850  (65 or older/legally blind + $1850) 

MARRIED FILING SEPARATELY $13,850  (65 or older/legally blind + $1500)

 MARRIED FILING JOINTLY $27,700  (65+/legally blind) )  + $1500 per spouse

 HEAD OF HOUSEHOLD  $20,800 (65 or older/blind)  + $1850)

If you need to enter a state or local refund Go to Federal>Wages & Income>1099-Misc and Other Common Income>State and Local Tax Refunds on Form 1099-G

[VolvoGirl]

And for California.....I haven't received a 1099G for CA in years for my refunds.  I think they stopped sending them.