No, you do not report your federal tax refund as income

A federal tax refund is money the government is returning to you because you overpaid your taxes during the year. It is not new income. The IRS does not send you a 1099 form for it, and you do not enter it on your next tax return as income.

The confusion usually comes from mixing up two different things: the refund itself (which you do not report) and the income that generated the refund in the first place (which you already reported when you filed). You already paid tax on that income. The refund is just the correction.

The only exception is if you received your refund in one tax year but it actually belonged to a prior year — a rare situation that creates a timing issue, not an income issue. That is covered below.

Key Takeaways

  • Your federal tax refund is not income and does not go on your next tax return as income.
  • You already reported the income that created the refund when you filed your original return.
  • The IRS does not issue a 1099 for tax refunds, and no government form will ask you to report it as income.
  • If you received a refund for a prior year, the timing may affect which return it appears on, but it is still not reported as new income.
  • Interest paid on a delayed refund is reported separately and is taxable, but the refund itself is not.

Why the refund is not income

Income is money you earn or receive. A tax refund is money you already earned and already reported as income — the government is simply giving back the portion you overpaid in taxes. Think of it as a correction to your tax bill, not as new earnings.

When you file your return, you report all your income for that year: wages, self-employment income, interest, dividends, and so on. You then calculate what you owe in tax on that income. If you had too much withheld from your paychecks or made estimated tax payments that were too high, you overpaid. The refund is the government returning the overpayment. Reporting it again as income would be counting the same money twice.

What happens if you received a refund for a prior year

Sometimes the IRS processes a refund from a prior year in the current year — for example, you file your 2022 return in early 2023 and receive the refund in mid-2023. The refund still does not become income on your 2023 return. The income it came from was reported in 2022, and the refund is a 2022 matter.

If the delay was caused by the IRS holding your refund (for verification, offset, or other reasons), you may receive interest on the refund. That interest is taxable income and will be reported to you on a Form 1099-INT. The refund itself is not; only the interest is.

Interest paid on a delayed refund

When the IRS delays paying a refund beyond a certain period, federal law requires them to pay you interest on the amount owed. This interest is real income to you and must be reported on your next tax return.

The IRS will send you a Form 1099-INT showing the interest amount. You report this on Schedule 1 (Form 1040) under "Interest" income. The refund itself still does not appear anywhere on your return; only the interest does. The interest rate varies by quarter and is set by the IRS each quarter.

State tax refunds follow the same rule

State tax refunds work the same way as federal refunds. You do not report a state refund as income on your federal return. However, if you received a state refund in the current year for taxes you deducted in a prior year, there is a special rule: you may have to report part of the refund as income on your federal return.

This happens only if you itemized deductions in the prior year and deducted state income taxes paid. When you get the refund, the IRS considers it a recovery of a deduction you took. You report this on Form 1040 Schedule 1 as "Other income." Your tax software or tax preparer will usually catch this automatically. If you took the standard deduction instead of itemizing, you do not report the state refund as income.

How to handle a refund on your next return

You do not need to do anything special. Simply file your return normally, reporting all your income for the current year. Do not include the prior year's refund anywhere on the return. If you received interest on a delayed refund, report only that interest on Schedule 1 as interest income.

If you are using tax software, it will not ask you to enter a refund as income. If a tax preparer asks you to, that is a sign something is wrong with how they are preparing your return. A refund should never appear as income on the return that follows it.

What if you owe taxes and your refund was offset

If you owed back taxes, child support, or other federal or state debts, the IRS may have taken your refund to pay those debts. This is called an offset. The refund was still not income — it was simply redirected to pay an existing obligation. You do not report it as income on your next return.

You should receive a notice explaining the offset. If you believe it was wrong, you can dispute it through the IRS or the agency that claimed the debt. The offset does not change how you report the refund (or do not report it) on your next return.

Frequently Asked Questions

Do I have to report my tax refund on my next year's return?

No. A tax refund is not income and does not go on your next return. The income that created the refund was already reported in the year you earned it. The only exception is interest paid on a delayed refund, which you report as interest income on Schedule 1.

Will the IRS send me a 1099 for my refund?

No. The IRS does not issue a 1099 for tax refunds. If you received interest on a delayed refund, you will receive a Form 1099-INT for the interest only, not for the refund itself.

What if I got a state tax refund — do I report that as federal income?

Not usually. However, if you itemized deductions in the prior year and deducted state income taxes, you may have to report part of the state refund as income on your federal return. This is called a recovery of a deduction. If you took the standard deduction, you do not report it.

My refund was offset to pay a debt — do I still not report it as income?

Correct. An offset does not change the fact that a refund is not income. The refund was simply redirected to pay an existing obligation. You do not report it on your next return.

Can I claim my refund as a deduction?

No. A refund is not a deductible expense. You cannot deduct money the government returns to you. Deductions are for expenses you paid out of your own pocket during the year.