A state income tax refund is reported as taxable income only if the taxpayer itemized deductions the previous year.

Name: A state income tax refund is reported as taxable income only if the taxpayer itemized deductions the previous year.
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If a taxpayer itemized deductions on their federal tax return in the previous year and received a benefit from deducting state and local taxes, any state income tax refund they receive may be considered taxable income for the year in which the refund is received.

A State Income Tax Refund Is Reported as Taxable Income