Do I have to pay taxes on my state refund from last year? When I entered the amount, my refund dropped.

[bluedeb · Accepted solution]

If all three of the following are true, your refund counts as taxable income:

• You itemized deductions last year, instead of taking the standard deduction
• You claimed state and local income taxes (not general sales taxes)
• Claiming the deduction helped you increase your federal refund or lower your tax bill

Even when your refund is taxable, it may not be the entire amount. It depends on how much the deduction affected your refund or tax bill. Just answer a few simple questions about last year’s refund, and we’ll calculate the taxable amount for you.