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State tax refund

Filing my 2023 tax return. I did not claim itemized deductions on my Form 1040 for 2022 and won't itemize for 2023. In 2023 I got a state tax refund for $484.00 for my 2022 NY state return. I also filed an amended NY state return in 2023 for the 2021 tax year for the Real Property Tax Relief Credit, and received a refund of $329.00 for that. Would that $329 refund need to be included as income on the 2023 Form 1040 even if I'm not itemizing? 

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1 Reply
MonikaK1
Employee Tax Expert

State tax refund

No, you don't need to include the refund you received in 2023 for the 2021 special New York Real Property Tax Relief Credit in income.

 

Most taxpayers receiving state tax refunds do not have to include the state tax refund in income for federal tax purposes. As a general rule, taxpayers who choose the standard deduction on their federal income tax returns do not owe federal income tax on state tax refunds.

 

Special one-time payments or credits offered by many states since 2020 for the general welfare of their residents were also determined not taxable nor were they a refund of deductible taxes. See IRS Notice 2023-56 for details.

 

The New York Real Property Tax Relief Credit was a refundable credit for which you qualified if you met all of the following requirements for the tax year:

 

  • you are subject to tax under Tax Law Article 22,
  • you were a New York State resident for all of the tax year,
  • your qualified gross income is $250,000 or less,
  • you owned and primarily resided for six months or more of the tax year in real property that received the STAR exemption or that qualified you for the STAR credit,
  • any rent you received from nonresidential use of your residence was 20% or less of the rental income, and
  • you are the one who paid real property taxes on the property fully or partially.

 

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