Jim received a $500 refund of state income taxes this year. Jim will not need to include the $500 in his gross income this year if he did not deduct state income taxes last year.

Question

Quizplus · Accepted Answer

If Jim did not deduct state income taxes last year, he did not receive a tax benefit for the amount he paid in state taxes. Therefore, the $500 refund of state income taxes is not considered taxable income. However, if Jim did deduct state income taxes last year, the $500 refund would be considered taxable income in the year it was received.

Jim Received a $500 Refund of State Income Taxes This