State tax refunds belong on line 1 of Schedule 1 (Form 1040), labeled "State and local income tax refunds"

When you receive a refund from your state for overpaid income taxes, the IRS requires you to report it on your federal return. The specific place is Schedule 1, line 1, which feeds into your total income on the main 1040 form. You report the full refund amount you received in the tax year you got it, regardless of which year the overpayment happened in.

This matters because state refunds are taxable income to the IRS. If you claimed the state and local tax deduction (SALT) on your previous year's return, you may owe federal tax on the refund you receive. The IRS wants to know about it so they can account for the tax benefit you already took.

You do not need to report refunds from property taxes, sales taxes, or other non-income taxes. Only state income tax refunds go on Schedule 1, line 1. If you received a refund from your city's local income tax, that also goes on the same line.

Key Takeaways

  • Report your state income tax refund on Schedule 1 (Form 1040), line 1, in the year you received the money.
  • The refund amount is taxable federal income, which means you may owe federal tax on it if you claimed SALT deductions the prior year.
  • Only income tax refunds count—property tax, sales tax, and other refunds do not go on this line.
  • If you did not itemize deductions in the year you overpaid, you owe no federal tax on the refund itself.

Why the IRS taxes your state refund

The reason state refunds are taxable comes down to how deductions work. If you itemized deductions on your 2023 return and claimed state income taxes as part of your SALT deduction, you reduced your federal taxable income. When your state refunds part of that money in 2024, the IRS treats it as income in 2024 to reverse the tax benefit you already received.

However, if you took the standard deduction instead of itemizing in the year you overpaid, your state refund is not taxable. You did not get a federal tax benefit from that state payment in the first place, so the refund does not trigger federal tax.

This is called the tax benefit rule. It prevents you from getting a double benefit—once when you deducted the payment and again by keeping the refund tax-free.

How to find your state refund amount

Your state tax agency sends you a notice showing the refund amount. This might come as a paper letter, an email, or a message in your state's online tax portal. The notice will show the exact dollar amount you received or are receiving.

If you received the refund by check, the amount is printed on the check itself. If your state deposited it directly to your bank account, your bank statement shows the deposit, and your state's tax website or the notice letter confirms the amount.

Keep this documentation when you file your federal return. You do not have to attach it to your 1040, but the IRS may ask for proof if they question the amount you reported.

Reporting the refund on Schedule 1

Schedule 1 is a separate form that attaches to your 1040. On line 1, enter the total amount of state and local income tax refunds you received during the tax year. If you received refunds from more than one state or from both state and local income taxes, add them together and enter the total.

The amount on Schedule 1, line 1 flows to line 8 of your 1040 form as part of your total income. From there, it is subject to federal income tax at your normal rate, unless you have other income or deductions that change your tax bracket.

If you are filing electronically, your tax software will prompt you for this information and place it in the correct spot automatically. If you are filing by paper, write the amount clearly on line 1 of Schedule 1 and make sure the form is signed and dated along with your 1040.

When a state refund is not taxable

A state refund is not taxable on your federal return if you did not itemize deductions in the year you paid the state tax. For example, if you took the standard deduction in 2023 and your state refunded you in 2024, you owe no federal tax on that refund. You did not claim a deduction for the payment, so there is no tax benefit to reverse.

You still report the refund on Schedule 1, line 1—you do not skip it. But if you did not itemize, you can note this on your return or simply report it as zero taxable income from the refund. Some tax software has a field to indicate whether you itemized in the prior year; if yours does, use it to avoid overstating your income.

Keep records showing whether you itemized or took the standard deduction in the year you overpaid. This protects you if the IRS questions why you reported a refund.

Refunds from prior-year returns and amended returns

If you filed an amended return (Form 1040-X) and received a refund from that correction, report it on Schedule 1, line 1 of the year you received it, using the same rules as any other state refund. The year the amendment covered does not matter—only the year you got the money.

Some states also issue refunds for overpayments from multiple years. If you receive a single check covering refunds from 2022 and 2023, you may need to split the amount between your 2022 amended return and your 2023 return. The state's notice letter should break down which portion covers which year. If it does not, contact your state tax agency for clarification before filing.

What to do if you did not receive a refund notice

If you expected a state refund but did not receive a notice or the money, check your state's tax website first. Most states have a refund status tool where you enter your Social Security number and the amount you expect. The tool will tell you whether the refund is still processing, was issued, or if there is a problem.

If the state shows the refund was issued but you never got it, contact your state tax agency directly. Refunds can be delayed by mail, deposited to an old bank account, or held if the state found an error on your return. The state can reissue the refund or correct the account information if needed.

Do not report a refund on your federal return until you have actually received it. If the state refund arrives after you file, you can file an amended 1040-X to add it to your income for that tax year.

Frequently Asked Questions

Do I report a state refund if I took the standard deduction?

Yes, you still report it on Schedule 1, line 1. However, it is not taxable federal income because you did not claim a deduction for the state payment in the first place. Some tax software lets you mark this; if yours does not, report the refund and note in your records that you took the standard deduction that year.

What if I received a refund from two different states?

Add the amounts together and enter the total on Schedule 1, line 1. The line covers all state and local income tax refunds received in that tax year, regardless of how many states or localities they came from.

Can I deduct the state refund from my income?

No. A refund is reported as income, not as a deduction. The tax benefit rule means you already got the deduction when you paid the state tax in the prior year; the refund reverses part of that benefit, so it is taxable.

Do I need to attach the refund notice to my 1040?

No, you do not have to attach it. Keep it with your tax records in case the IRS asks for proof. If you are filing electronically, you typically cannot attach documents anyway; just enter the amount and keep the documentation at home.

What if my state refund arrived in January but covered taxes I paid in the prior year?

Report it on your current-year return—the year you received it. If you received it in January 2024, it goes on your 2024 return, even if it refunds 2023 taxes. The IRS cares about when you got the money, not which tax year it relates to.