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Do I need to report last year’s state tax refund as income? 1099-G

If you took a standard deduction last year or itemized deductions but did not itemize the amount of your state income tax, then your state tax refund from the prior year is not taxable.

Go to this section in Credit Karma Tax: Income - Form 1099-G

Your state tax refund from last year may be taxable if you itemized the prior year and took a deduction for your state income taxes paid. If your state taxes ended up being less than the amount you had claimed for state taxes as a deduction on your federal return, all or part of your state refund can become taxable income in the next tax year.

I’m filing a joint return this year after filing separately last year

Prior year state tax refunds may be taxable for individuals who itemized a deduction for state income taxes. If you are filing jointly this year but filed separately from your spouse in the prior tax year, and either you or your spouse took this deduction, you will need to provide the information from Box 2 of your Form 1099-G to determine the taxable portion of your state tax refund, if any.

  1. Go to Income - Form 1099-G for Prior year state refund.
  2. Enter the requested information from the Form 1099-Gs received by you and/or your spouse, whichever of you took an itemized deduction for state tax refund on your federal return for the year shown in box 3.
    • Do not include Form 1099-G from anyone who used the standard deduction or did not take this deduction for the tax year shown in box 3.
  3. After you’re done entering the information from any Form 1099-Gs, choose Next to continue.
  4. Answer Yes to Did you itemize deductions last year? If you did itemize deductions on last year’s federal return.
  5. Credit Karma Tax will ask you for some information from Schedule A of your prior year tax return.
    • If both taxpayers itemized deductions last year on separate returns: you will need to combine the amounts from both of your prior year tax returns.
    • If only one taxpayer itemized deductions last year on their return: use only the amounts from the spouse’s return who itemized deductions last year.
  6. After providing this information from last year’s Schedule A, choose Next to continue.
  7. Select the appropriate filing status from the prior year.
  8. Choose Next to finish this section.
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