2023 State Tax Refund issued in 2025, Taxable in 2024 Federal Income Tax Return or 2025?

[Priller]

Hi all,

I'm currently working on my 2024 federal income tax form in turbotax and the program automatically transferred/indicates that I received a $2,822 State tax refund in 2024 from my 2023 State Income Tax Return, but I actually filed both my 2023 federal tax return and my State tax return in 2025. I received both a 2023 federal tax refund and a 2023 tax refund ($2,822) in 2025.

Should I overwrite the entry for $2,822 for the State tax refund for 2023 in my 2024 federal income tax form in turbotax since I did not receive the 2023 State tax refund in 2025... And should this 2023 tax refund be entered when I file my 2025 Income tax form in 2026?

By the way, I did not itemize in 2023 - used the Standard deduction for my 2023 Federal Income Tax form... Also, possibly not itemizing on my 2024 Federal Income tax form in turbotax...

[rjs]

You report a state income tax refund on your federal tax return for the year that you receive the refund, no matter what year the refund is for. However, since you did not itemize on your 2023 federal tax return, your 2023 state refund is not taxable and you should not report it in any year.

[Priller]

Thank you for the prompt response.

Regarding the tax refund reporting comment associated with not itemizing, I thought that Turbotax can do a comparative analysis to determine if the taxpayer itemized the previous year and then automatically determines that the state tax refund is either taxable or not, right?

So, even if I were to enter the 2023 state tax refund in turbotax in the 2025 federal tax return, the program will sort it out, correct?

[rjs]

If you prefer, you can go through the state tax refund section of the interview instead of removing the refund. But the interview does not figure it out automatically. After several questions about the refund, TurboTax will ask you if you took the standard deduction or itemized in 2023. If you answer that you took the standard deduction it will tell you that the refund is not taxable, and it will not report the refund on your tax return.

The result is the same whichever way you handle it. The state refund will not appear on your 2024 federal tax return. It doesn't matter how you get that result. The IRS doesn't know whether you entered the refund or not. And there is no reason to enter the refund in your 2025 tax return, since you know it's not taxable.

[Priller]

Thank you for providing additional comments regarding my second inquiry.

Though I wasn’t able to fully understand what you were saying – sorry about that.

Just wanted to share what I’m understanding so far:

A state income tax refund is taxable in the year I receive it only if I claimed itemized deductions (and deducted state income taxes) in the prior year.

📌 In my case:

• I filed my 2023 federal return in 2025 (late).
• I received both my 2023 federal refund and my 2023 California state refund ($2,822) in 2025.
• That means I did not receive the refund in 2024 at all.

👉 Therefore:

• The $2,822 does not belong on my 2024 tax return.
• It would instead be considered for my 2025 tax return (filed in 2026), if it is taxable (again, only if I itemized and claimed a deduction for state income tax in 2023).

✅ So yes — in TurboTax for your 2024 return, I should overwrite/delete the $2,822 state refund entry, since I didn’t actually receive it in 2024, right?

[Priller]

So yes — in TurboTax for your my 2024 return, I should overwrite/delete the $2,822 state refund entry, since I didn’t actually receive it in 2024, right?

[VolvoGirl]

Yes.  Since you did not get the 2023 state refund in 2024 change it to zero.  If you got the 2023 State refund in 2025 it goes on your 2025 return.  But only if you took the Itemized Deductions on your 2023 return when you filed 2023.   If your took the Standard Deduction on your 2023 federal tax return you do not need to report the state refund at all.

[rjs · Accepted solution]

@Priller 

I'm going to add a complication that does not apply to you, as a clarification for other people who might read this.

You wrote:

"A state income tax refund is taxable in the year I receive it only if I claimed itemized deductions (and deducted state income taxes) in the prior year."

and

"if it is taxable (again, only if I itemized and claimed a deduction for state income tax in 2023)."

To be more precise, the refund is only taxable to the extent that you received a tax benefit for the deduction in the earlier year. There is a cap on the deduction for state and local taxes, often called the SALT cap. The cap applies to the total of real estate tax, personal property tax, and either state and local income tax or state and local sales tax. If your total state and local taxes exceeded the cap, then you did not receive the full benefit of itemizing your state income tax. In that case the state tax refund might only be partially taxable, or not taxable at all, even though you itemized and claimed a deduction for state income tax. The calculation gets complicated.

But as I said, this does not apply to you, @Priller, because you did not itemize deductions for 2023. You did not receive any tax benefit for the deduction, because there was no deduction. So your 2023 state tax refund is definitely not taxable at all. You do not have to enter it in your 2024 or 2025 tax return, and you do not have to do the complicated calculations.