A tax refund from last year is not income on your current tax return

The IRS does not count a tax refund as income. When you receive a refund, you are getting back money you already paid in taxes — it is a return of your own money, not new earnings. Your 2024 tax refund does not appear on your 2025 tax return as income, and you should not report it anywhere on Form 1040 or any other federal return.

This applies whether you received your refund by direct deposit, check, or any other method. The source of the refund — federal, state, or local — does not change this rule. A refund is treated as a correction to a prior year, not as current-year income.

Key Takeaways

  • A tax refund is money you already paid in taxes being returned to you, so it has no place on your current tax return as income.
  • The IRS does not send you a 1099 form for a tax refund, because refunds are not taxable income.
  • If you received a refund and later owe money to the IRS, the agency may offset your refund against that debt without sending you the money.
  • State and local tax refunds follow the same rule — they do not count as income on your federal return, though some states may tax them under certain conditions.

Why refunds are not income

Income is money you earn or receive that you did not already pay tax on. A refund is the opposite: it is money you paid in taxes during the year that turned out to be more than you actually owed. When the IRS returns that overpayment to you, it is settling an account, not paying you for work or providing you a benefit.

Think of it like a deposit you made on a rental apartment. If you move out and the landlord returns your deposit, that money is not income — it was always yours. A tax refund works the same way. You sent the money to the government during the year through withholding or estimated tax payments. When you file your return and the IRS calculates what you actually owe, any overpayment comes back to you.

How the IRS treats refunds on your next return

The IRS does not issue a 1099 form for a tax refund. You will not see it reported on any official tax document, and you should not report it yourself. If a tax software program or a tax preparer asks you to enter a refund from a prior year as income, that is an error — stop and correct it before filing.

The only time a prior-year refund affects your current return is if the IRS offsets it. Offset happens when you owe money to the IRS, the Department of Education (for student loans), a state tax agency, or a child support enforcement office. The IRS can use your refund to pay down that debt without sending you the money first. You will receive a notice explaining the offset, but the refund itself still does not appear as income on your return.

State and local tax refunds

State and local tax refunds follow the same federal rule: they are not income on your federal return. If you received a refund from your state in 2024, you do not report it on your 2025 federal Form 1040.

However, some states tax their own refunds under specific conditions. A few states — including New York and Vermont — tax a state income tax refund if you itemized deductions in the year you paid the tax. This is rare and applies only if you claimed the state and local tax deduction (SALT) on your federal return in the prior year. Check your state's tax guidance or contact your state revenue department to know whether your state taxes refunds. If it does, you will receive a state form documenting the taxable amount.

What to do if you are unsure whether to report a refund

If you received money from the IRS or a state tax agency and you are not certain whether it is a refund or a different payment, look at the notice or letter that came with it. The IRS labels refunds clearly — the document will say "refund" or "overpayment" and will reference a specific tax year. If the payment is for something else (a recovery rebate credit, a stimulus payment, or a tax credit), the notice will say so explicitly.

If you cannot find the original notice, contact the IRS at 1-800-829-1040 or log into your IRS account at irs.gov to view your account transcript. Your transcript shows all payments you made and all refunds issued for each tax year. For state refunds, visit your state revenue department's website or call the number on your state tax return.

Refunds and means-tested benefits

While a tax refund is not income for tax purposes, some government benefit programs count it differently. Programs like Supplemental Security Income (SSI), Medicaid, and SNAP may count a recent refund as a resource or as income in the month you receive it, depending on the program's rules and your state.

If you receive means-tested benefits, report a tax refund to your benefits caseworker before depositing it. The caseworker can tell you whether the refund affects your benefits and by how much. Failing to report it could result in an overpayment that you will have to repay later.

Frequently Asked Questions

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

No. A tax refund is not income and does not go anywhere on your federal return. The IRS does not send you a 1099 for it, and you should not enter it as income in your tax software.

What if the IRS offsets my refund to pay a debt?

The offset itself does not make the refund taxable income. You will receive a notice explaining the offset. The money goes to pay your debt, but it is still treated as a return of your own overpayment, not as new income.

Can a state tax my state income tax refund?

A few states, including New York and Vermont, tax their own refunds under certain conditions — usually if you itemized deductions in the year you paid the tax. Most states do not. Check your state's tax guidance to know whether your refund is taxable by your state.

Does a tax refund count as income for benefits like SNAP or Medicaid?

It depends on the program and your state. Some benefits programs count a recent refund as income or a resource in the month you receive it. Report the refund to your benefits caseworker before depositing it so they can tell you whether it affects your benefits.

What if I received a refund but I am not sure what it is for?

Check the notice that came with the payment — it will say whether it is a refund, a credit, or a different type of payment. If you cannot find the notice, log into your IRS account at irs.gov or call 1-800-829-1040 to view your account history.