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If you itemized your deductions in the previous year, all or some of your prior year state income tax refund may be considered taxable income on this year's Federal tax return (Schedule 1 (Form 1040) Additional Income and Adjustments to Income, Line 1). If you claimed the standard deduction, the state refund is not taxable.

  1. From within your TaxAct return (Online or Desktop), click Federal. On smaller devices, click in the upper left-hand corner, then click Federal.
  2. Click State Income Tax Refund in the Federal Quick Q&A Topics menu.
  3. Click + Add Form 1099-G State Refund Document to create a new copy of the form or click Edit to review a form already created.
  4. Continue with the interview process to enter all of the appropriate information.
  5. On the screen titled State or Local Income Tax Refund - Document - Summary, click Continue, then click Total of itemized deductions if you want to determine what portion (if any) of the refund amount(s) entered is taxable on your return.
  6. The program will proceed through the applicable screens for you to enter or review the information from your prior year federal return to determine the taxable amount (if any) of your state income tax refund.
  7. On the screen titled State or Local Income Tax Refund - Taxable Refund, you will find the taxable portion (if any) of your prior year state income tax refund based on the entries on the previous screens.

If you had a balance due with your 2019 state income tax return or made a 2019 state or local estimated tax payment after December 31, 2019, this may be deductible on Schedule A (Form 1040) Itemized Deductions, Line 5.

  1. From within your TaxAct return (Online or Desktop), click Federal. On smaller devices, click in the upper left-hand corner, then click Federal.
  2. Click Itemized or Standard Deductions in the Federal Quick Q&A Topics menu to expand, then click Taxes paid.
  3. Continue with the interview process to enter all of the appropriate information.
  4. On the screen titled Enter state and local income taxes you paid during 2020, enter the applicable amount, then click Continue.

Prior year Federal tax refunds (and payments) are not taxable (or deductible) on the current year's Federal income tax return. However, please check with your state to determine if this information needs to be reported anywhere on your current year state tax return.

Note that any link in the information above is updated each year automatically and will take you to the most recent version of the document at the time it is accessed.


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