Is my MN property tax refund considered "state or local income"?

[waywocket]

EDIT:  I received the refund via"Form M1PR, Homestead Credit Refund (for Homeowners) and Renter Property Tax Refund."  I am a homeowner and the refund line is labeled "Homestead Credit Refund."  I should have been more specific!

Should this credit be reported as "other income" on line 21 of Form 1040?  Or somewhere else?
Thanks!

[Hal_Al]

That's not taxable income and is not reported on your federal tax return. That's a state income tax credit. It is not a "refund" of taxes paid.

[waywocket]

THANK YOU!

[Hal_Al · Accepted solution]

No. Property tax is separate from income tax. However there may be a similar tax consequence. If you deducted all the property tax, you paid in 2016, on your 2016 federal return and then a got a refund of some of that tax, in 2017, the refund would be taxable income on your 2017 return. The difference is where it gets reported. A taxable refund of local and state income tax is so common, that there is a line for it (line 10*) on form 1040. 

Property tax refunds are less common and are reported as "other income" on line 21** of form 1040,

* line 1 of Schedule 1 on 2020 returns 

** line 8 of Schedule 1 on 2020 returns

[TaxGuyBill]

For Minnesota property tax refunds, the refund comes in the same year as the bill.  So when you enter the amount of real estate taxes paid, you would enter the total amount MINUS the amount you received as a refund.

[UpsideDown]

Very interesting, @TaxGuyBill, I think you're right!  Form M1PR for the 2018 Property Tax refund says that the refund is a function of taxable income for tax year 2018 and property taxes payable in 2019.  So, from the standpoint of federal tax deduction, the MN property tax refund is indeed a reduction in the 2019 local taxes paid rather than a refund of taxes paid in 2018.

[UpsideDown]

Interestingly, whether I count my MN property tax refund (filed for and received in 2018, and based on 2017 tax year income) as other income (Line 21 of Schedule 1) or simply subtract it from the deductible property taxes paid in 2018 (Line 5b on Schedule A), the end result on my taxes owed/refund amount is the same.  

[gingerduke2]

If I'm using a standard deduction in for 2018 Taxes do I need to report the home Credit Refund as other income?  I would think not as I'm not claiming the Property Taxes as a deductions.  Is this correct?

[TaxGuyBill]

No, it is not reported as other income.

In the event you claim the property tax as a deduction for any purpose (such as Itemizing or a Home Office), then you would REDUCE the amount of property taxes paid by the amount of your refund.  It never will be added to 'other income'.

[Schnichels63]

I received a refund on my real estate taxes this year.  Will that be added to my taxable income? 
I do file with the standard deduction.