If you get a tax refund in 2018, that means in 2017 you paid too much in taxes. If you took a full deduction, then you deducted more than your tax amount —more than was allowed. Rather than make you amend your 2017 return to reduce your deduction, you report the refund as income in the year the refund is paid. It is a “taxable recovery” or a reimbursement of a previous deduction.
What refund is this? State income tax, property tax, STAR, etc? A $1500 jump would suggest your refund amount is around $6000, is this correct? Did you take the standard or itemized deduction on your 2017 federal tax return?
Hi Opus 17, thanks for the response. The refund was from State Income Tax and I took itemized deduction on my 2017 tax return. Not sure why State refund is considered an income?
If you deducted state taxes paid as an itemized deduction in 2017, then any refund of state taxes you get for 2017 will be income in 2018.
If you get a tax refund in 2018, that means in 2017 you paid too much in taxes. If you took a full deduction, then you deducted more than your tax amount —more than was allowed. Rather than make you amend your 2017 return to reduce your deduction, you report the refund as income in the year the refund is paid. It is a “taxable recovery” or a reimbursement of a previous deduction.