Distributing an Estate's Federal Tax Refund to a Beneficiary

[Lovemyfam9]

I am executor of my father's estate.  There was a 1099-R from an 403B account that was paid out to the estate, and I've completed the 2024 estate 1041 tax return.  I was the sole beneficiary of the estate, so I received a K-1 from the distribution.  The estate will receive significant federal and state tax refunds for the 1099-R taxes withheld.  (Meanwhile I have hefty taxes owing personally).  My requestion relates to 2025 returns for the estate.  I don't think the federal refund would be reported as income (as federal refunds are not reported as income for individuals); state refunds are considered for individuals as whether they may be taxable, but I can't tell from the 1041 if a state tax refund for 2024 taxes will need to be reported as income for the estate for 2025?  Otherwise, the estate will not have more than $600 income in 2025.  Once received, the tax refunds will be distributed to me as a beneficiary, so will I need to file a 1041 regardless to report distribution to beneficiary?  I feel like this money from the refunds has already been taxed and then would be passed through with a K-1 for me to pay taxes on it again, but maybe I'm just confused.  Thanks for any insights!

[M-MTax · Accepted solution]

 I don't think the federal refund would be reported as income...

It is not income and doesn't need to be reported as such.

I can't tell from the 1041 if a state tax refund for 2024 taxes will need to be reported...

If you did not (or don't) deduct state taxes paid by the estate, the state refund will not be taxable at the federal level. If the estate did (or does) deduct state taxes paid, the refund may be taxable to the extent the estate had a tax benefit from that deduction.

I am sorry for your loss.