Why is a state tax refund considered income? Isn't it just an over payment of tax?

[MindyB]

You only need to report your state tax refund as income if you itemized your deductions on your prior year federal return (or the year which the refund relates to). If you took the standard deduction, you did not receive a tax benefit from those state taxes, so the refund is not taxable. Taxpayers who take the standard deduction can skip entering this information.

[VolvoGirl]

Yes but if you itemized deductions last year you got a deduction for state taxes paid which was used to determine your state refund or tax due.   You got a deduction benefit for it so now you have to include it as income. If you took the standard deduction it is not taxable and you don't need to report it.