When checking if my CA refund is income, it asks if I took the standard deduction or itemized. Is this referring to the deduction on my 540 or on my 1040?

[zgozvrm]

I used the standard deduction on my 1040 but itemized on my 540

[VolvoGirl · Accepted solution]

That's for your federal 1040 return.  If you took the Standard Deduction on Federal last year the state refund is not taxable and you don't even need to enter it.

A State Tax Refund is taxable if you itemized deductions on that prior year's federal return and took a deduction for state income taxes instead of the sale tax.  You got a deduction benefit for it so now you have to include it as income. If you took the standard deduction it is not taxable and you don't need to report it.