State and Local Refunds

Taxpayers who receive a refund of state or local taxes may receive Form 1099-G, Certain Government Payments with their refund amount shown in box 2.

Taxpayers who claimed the standard deduction on the tax return for the year they received a refund do not have to include the refund in their taxable income.

However, taxpayers who itemized deductions and received a state or local refund may have to include all or part of the refund in their taxable income.

• Use the State and Local Income Tax Refund Worksheet - Line 10 in the Form 1040 Instruction booklet to determine what part, if any, of the refund is taxable
• Enter the taxable portion on Form 1040, line 10.

	Refer to a tax professional any taxpayer whose tax refund reflects deductions, credits, or payments for prior tax years.