Report state tax refunds on line 1 of Schedule 1 (Form 1040), under "Other Income"

When you receive a refund from your state income tax return, the IRS wants to know about it — but only if you claimed the state taxes as a deduction in the year you paid them. If you did, that refund counts as income on your federal return for the year you receive it, not the year you paid the tax.

The place to report it is Schedule 1 (Form 1040), line 1, labeled "Other Income." You'll attach Schedule 1 to your Form 1040 when you file. The amount goes on the line, and you'll add it to your other income when calculating your total.

This rule applies to refunds from any state — whether you live in a state with income tax or received a refund from a state where you worked temporarily. It also applies to refunds from local income taxes in cities that collect them.

Key Takeaways

  • You report a state tax refund as income only if you deducted state taxes on your previous year's federal return.
  • The refund goes on Schedule 1 (Form 1040), line 1, in the year you receive the money, not the year you paid the tax.
  • If you took the standard deduction instead of itemizing, you do not report the refund as income.
  • Your state will send you a 1099-G form showing the refund amount, which helps you verify what to report.

When you must report a refund versus when you don't

The key question is whether you deducted state taxes on your previous year's federal return. If you itemized deductions on last year's Form 1040 and included state income tax, property tax, or sales tax in that total, then this year's state refund is taxable income. If you took the standard deduction instead, the refund is not taxable and you don't report it.

This matters because of something called the "tax benefit rule." The IRS only taxes you on the refund if you actually got a tax benefit from deducting those state taxes in the first place. If you took the standard deduction, you got no benefit, so there's nothing to tax.

Example: In 2023, you itemized deductions and deducted $8,000 in state income tax. In 2024, your state refunds you $1,200 of that. You report the $1,200 on your 2024 Schedule 1, line 1. But if you had taken the standard deduction in 2023, you would not report the 2024 refund.

How to find the refund amount on your 1099-G

Your state will mail you a Form 1099-G (Certain Government Payments) showing the refund amount. This form arrives by January 31 of the year after you receive the refund. Box 1 on the 1099-G shows the state income tax refund; box 2 shows any federal refund (which you don't report again).

Keep the 1099-G with your tax records. You don't attach it to your return, but the IRS has a copy, so the amount you report on Schedule 1, line 1 should match box 1 of your 1099-G. If the amounts don't match, the IRS will notice and may send you a notice asking for an explanation.

If you don't receive a 1099-G by early February, contact your state tax agency. Some states only send the form if the refund exceeds a certain amount (often $10), so a small refund might not generate a 1099-G — but you should still report it if you deducted those taxes.

Filling in Schedule 1 correctly

Schedule 1 is a separate form that attaches to your Form 1040. Line 1 is labeled "Other Income" and has a blank space for the amount. Write the refund amount there — for example, $1,200.

You don't need to write an explanation on the form itself, but keep your 1099-G and your previous year's tax return with your records in case the IRS asks how you calculated it. The amount from Schedule 1, line 1 flows to Form 1040, line 8, where it gets added to your wages, interest, dividends, and other income.

If you're using tax software, it will usually ask you about state refunds when you enter "other income," and it will automatically place the amount on the correct line. If you're filing by hand, make sure you're using the current year's Schedule 1 — the form changes slightly each year.

What happens if you received a refund but didn't deduct those taxes

If you received a state refund but you took the standard deduction on your previous year's return, you have nothing to report. The refund is not taxable income in this situation. You can straightforward keep the money without reporting it on your federal return.

This is one of the few situations where the IRS doesn't tax money you receive. It's because you received no tax benefit from the deduction in the first place — the standard deduction was larger than your itemized deductions would have been, so the state tax deduction was worthless to you.

Partial refunds and amended returns

Sometimes you'll receive a partial refund — the state keeps part of what you overpaid and applies it to a debt or penalty. Report only the amount you actually received, not the full overpayment. The 1099-G will show the refund amount, which is what you report.

If you filed your previous year's return and later amended it (using Form 1040-X), your deduction for state taxes might have changed. If you reduced your state tax deduction on the amended return, you may need to amend your current year's return as well to reduce the refund income you reported. This situation is complex — consider consulting a tax professional if it applies to you.

Frequently Asked Questions

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

No. You only report the refund if you itemized deductions and included state taxes in that itemization on your previous year's return. If you took the standard deduction, the refund is not taxable.

What if I didn't receive a 1099-G but I got a refund?

Some states don't send a 1099-G for small refunds. You should still report the refund on Schedule 1, line 1 if you deducted those state taxes. Keep your state refund documentation with your records.

Can I deduct state taxes and then not report the refund?

No. If you deducted state taxes and later receive a refund, you must report that refund as income. The two are connected — you can't get the deduction benefit without reporting the refund.

What if my state refund arrived in a different year than I expected?

Report the refund in the year you receive it, not the year you paid the tax or filed your state return. The 1099-G will show the year you received it, which is the year you report it on your federal return.

Does a property tax refund go on the same line?

Yes. Any refund of state or local taxes you deducted — including property tax refunds — goes on Schedule 1, line 1. The 1099-G will show all of them together in box 1.