State tax refunds don't go on your federal 1040 at all — they go on your state return

A state tax refund is money your state owes you, not the federal government. It appears on your state income tax return (the form your state requires, such as Form 1040-NR for nonresidents or your state's equivalent), not on your federal 1040. The federal 1040 is only for federal income tax, federal credits, and federal withholding.

However, if you received a state refund in the current tax year and it was taxable income to you, that refund amount may need to be reported on your federal 1040 under certain circumstances. This happens when you itemized deductions in the year you paid the state tax, and the refund is considered income in the year you receive it.

Key Takeaways

  • State tax refunds belong on your state tax return, not your federal 1040, because they are state money.
  • If you itemized deductions on your federal return in the year you paid state taxes, a state refund you receive may be taxable federal income and must be reported on Form 1040, Schedule 1.
  • If you took the standard deduction, your state refund is generally not taxable to the federal government, even if you receive it in the current year.
  • The IRS Form 1099-G reports state refunds of $10 or more, and you will receive a copy if your state issued one.

When a state refund becomes federal taxable income

The rule is called the "tax benefit rule." If you deducted state and local taxes (SALT) on your federal return in the prior year, and you receive a refund of those taxes in the current year, that refund counts as federal income in the year you receive it. You must report it on your federal 1040.

This applies only if you itemized deductions. If you took the standard deduction in the year you paid the state tax, your state refund is not taxable federally, because you received no federal tax benefit from paying the state tax in the first place.

Example: You paid $5,000 in state income tax in 2023 and itemized deductions on your 2023 federal return, claiming the $5,000 as part of your SALT deduction. In 2024, your state sends you a $1,200 refund. That $1,200 is taxable income on your 2024 federal return because you received a federal tax benefit (the deduction) when you paid it.

Where to report the refund on your 1040

If your state refund is taxable, report it on Form 1040, Schedule 1, Line 1 (Other Income). This is the line for state and local income tax refunds. You do not report it on the main 1040 form itself.

You will need the amount from the Form 1099-G your state sends you. States issue a 1099-G when they refund $10 or more. The refund amount appears in Box 2 of that form. The IRS receives a copy of your 1099-G, so the amount must match what you report.

How to know if your refund is taxable

Check your prior-year federal return. Look at whether you itemized deductions or took the standard deduction.

If you itemized: Your state refund is taxable. Report it on Schedule 1, Line 1.

If you took the standard deduction: Your state refund is not taxable federally. Do not report it on your federal return. (You may still need to report it on your state return if your state requires it, but that is separate.)

The SALT deduction cap of $10,000 per year also matters. If your total SALT deductions exceeded $10,000 in the year you paid the state tax, only the portion of your refund that relates to the deductible amount is taxable. This calculation can be complex; consider a tax professional if your situation is unclear.

What happens if you don't report it

The IRS matches your 1040 against the 1099-G your state files. If you receive a 1099-G and do not report the refund, the IRS will likely send you a notice of underreported income. You will owe the tax on the refund plus interest and possibly penalties.

If your state refund was under $10, your state may not issue a 1099-G. In that case, there is no IRS match, but you are still legally required to report it if it is taxable. The IRS can discover the omission through an audit.

State refunds and your state return

Your state return is where you report what you owe or are owed to your state. A refund you receive from your state in the current year may or may not be taxable on your state return, depending on your state's rules. Some states tax refunds of prior-year state taxes; others do not. Check your state's tax instructions or contact your state tax agency.

Do not confuse your state return with your federal return. A state refund goes on your state return first. If it is also taxable federally (because you itemized), it then goes on your federal Schedule 1.

Frequently Asked Questions

Do I report my state refund on the main 1040 form?

No. If your state refund is taxable, it goes on Form 1040, Schedule 1, Line 1 (Other Income), not on the main 1040 itself. The main 1040 is for wages, interest, and other primary income sources.

What if I took the standard deduction — is my state refund still taxable?

No. If you took the standard deduction in the year you paid the state tax, you received no federal tax benefit from that payment, so the refund is not taxable federally. You do not report it on your federal return.

I received a 1099-G but I'm not sure if my refund is taxable. What do I do?

Review your prior-year federal return to see if you itemized deductions. If you did, the refund is taxable and must be reported on Schedule 1, Line 1. If you took the standard deduction, it is not taxable federally. If you are unsure whether you itemized, check your prior-year 1040 or Schedule A.

Can I deduct my state refund on my current-year federal return?

No. A refund is income, not a deductible expense. You report it as income on Schedule 1. You cannot deduct it again.

My state refund was less than $10 — do I still have to report it?

Yes, if it is taxable. States do not issue a 1099-G for refunds under $10, but you are still required to report taxable income to the IRS, regardless of the amount. The absence of a 1099-G does not make the refund non-taxable.