Is Interest from Michigan State Income Tax Refund Taxable

Forum|Forum|1 year ago
January 28, 2025
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Hello, For tax year 2023 filing, I received $25 interest in 2024 on my Michigan state income tax refund because the state did not send me the refund until August 2024. I received a 1099G from Michigan Dept of Treasury that says "calendar year 2024". On box 2, "Michigan Income Tax Refund of Offset", it shows "Refund $0.00" and "Interest $25.00". I called the Michigan Dept of Treasury and was told if I claimed "standard deduction" on federal income tax (which I claimed standard deduction for 2023), the Michigan 1099G is for my information only and I don't need to report the $25 interest from Michigan state as taxable income on my 2024 federal tax return. Can someone help me to confirm this? I know that if I receive interest from federal income tax refund for the previous year, I have to report it as taxable interest income. Is the interest from state income tax refund different, that if I claimed standard deduction for year 2023, the interest from 2023 Michigan state income refund is not taxable for 2024 federal filing? Thank you.

Best answer by VolvoGirl

Yes the $25 interest is taxable.

Enter the interest like a 1099Int and put the amount in box 1.

Enter a 1099-Int under

Federal or Personal for Home & Business

Wages & Income at top

Interest and Dividends

Interest on 1099INT - Click the Start or Revisit button

VolvoGirl

Employee

All interest is taxable no matter who pays it or why. The actual state refund may or may not be taxable on the federal return.

A State Tax Refund is taxable if you itemized deductions on that prior year's federal return and took a deduction for state income taxes instead of the sale tax. You got a deduction benefit for it so now you have to include it as income. If you took the standard deduction it is not taxable and you don't need to report it.

syoung123Author

To clarify -

1. I used standard deduction for 2023 federal tax filing, so the state income refund itself is not taxable for year 2024.

2. However, I received additional $25 that was interest from the state because the state sent me the refund late. The $25 interest is taxable income for 2024 filing.

Am I correct?

VolvoGirlAnswer