Yes, you need to report it. You can enter the state refund amount in TurboTax, and we'll figure if it's taxable or not.
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.
For instructions to enter the state refund , see here - Where do I enter a 1099-G for a state or local tax refund?