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January 20, 2020

If you itemize deductions every year your refund for the State and local taxes you paid last year will show up this year as income. If you take the standard deduction every year then your State and local refund will not show up as income.

 

When you itemize, part of the itemization is the State and local taxes that you pay. You deduct these taxes from your income in the year that you pay them. The next year you may receive a refund from the State or local government because you overpaid your taxes. Because you saw a tax benefit for them (ie they reduced your taxable income) you need to add them to income. If your State or local tax refund was only partially taxable, Turbotax can help you figure that too. 

 

For more information about State and local taxes click here.

 

 

 

 

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