It depends. If you did not itemize or used the general sales tax deduction on your Federal Income Tax Return for the tax year indicated on Box 3 of Form 1099-G from California, you do not need to claim the amount on the 1099-G.
A state tax refund from filing the prior year's taxes would only be taxable to the extent there was a tax benefit - i.e., you took an itemized deduction for taxes paid.
The California Franchise Tax Board provides this information about Forms 1099-G issued by that agency:
We use 1099-G to report amounts:
- Refunded to you by direct deposit or check
- Offset against other liabilities, such as:
- Credited toward estimated tax payments
- Applied to a Use Tax payment
- Intercepted by other state or county agencies or the IRS
Why you received a 1099-G
You received this form because both of the following happened:
- You claimed state income tax payments as an itemized deduction on Schedule A of your Federal Income Tax Return for the tax year listed in Box 3
- You received a refund, credit, or offset of $10 or more
1099-G is not a:
- Bill
- Notice of an additional refund
If you are entering a state tax refund received in 2024 as income and reported on Form 1099-G, TurboTax will ask how much you deducted for state and local taxes in 2023 (line 5 from Schedule A).
For "total of all your payments and withholdings", enter payments for the state for which you received the refund. If you received refunds from more than one state, enter each one separately in TurboTax and report payments associated with that state. Use the link to Add another state or local tax refund.
Under the entry field, "Total of all your payments and withholding", a link appears, "What does this include?". The text at that link explains:
Add up any payments you made to your state or locality, along with any state or locality withholdings from the previous tax year (in this case, 2023), including:
- Amounts withheld on your W-2, W-2G, and 1099
- Estimated tax payments for 2023 (including any paid in 2024 for 2023 - it's common for the fourth quarterly payment to be made in January)
- Overpayment from 2022 applied toward your 2023 return
- Payments made with an extension of time to file
- Refundable credits
You can find most of this info on your 2023 state tax return. Do not include balance-due payments made with (or after) filing a return. Enter the total amount of all of these combined here.
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