Report your state refund on line 1 of Schedule 1 (Form 1040), labeled "Interest Income"

When you receive a 1099-G for a state tax refund, the IRS wants to know about it on your federal return. The specific place is Schedule 1, line 1, which is titled "Interest Income." This might seem odd — your refund is not interest — but the IRS groups state refunds here for tax purposes.

You will attach Schedule 1 to your Form 1040. If you are filing electronically, your tax software will prompt you to enter the amount and route it to the correct line automatically. If you are filing by hand, write the amount from box 2 of your 1099-G on Schedule 1, line 1, then add that line's total to your other income on Form 1040, line 8.

The amount you report is almost always the full amount shown in box 2 of your 1099-G. Box 2 contains the state refund itself. Box 1 shows the amount of state tax you paid during the year — that is different information and does not go on your federal return.

Key Takeaways

  • State refunds reported on a 1099-G go on Schedule 1, line 1 of your Form 1040, even though that line is labeled "Interest Income."
  • Use the amount from box 2 of your 1099-G, which is the refund itself, not box 1, which shows what you paid in state taxes.
  • If you file electronically, your tax software will place the amount in the correct location once you enter it.
  • You must report the refund even if it is small, because the IRS receives a copy of your 1099-G and will match it to your return.

Why the IRS requires you to report state refunds

A state tax refund is income in the year you receive it, from the IRS's perspective. In the previous year, you may have deducted your state taxes on your federal return (if you itemized deductions). That deduction reduced your federal taxable income. Now that you are getting some of that money back, the IRS treats the refund as income to balance the earlier deduction.

This matters only if you itemized deductions in the year you paid the state tax. If you took the standard deduction, you did not deduct state taxes, so technically the refund should not be taxable. However, the IRS still requires you to report it on Schedule 1, line 1. The tax software or the IRS will handle the adjustment if you are may have access to to one.

What happens if you do not report the state refund

The IRS receives a copy of every 1099-G issued to you. If the amount on your return does not match the amount on the 1099-G the IRS received from your state, the IRS will send you a notice. This notice, called a CP2000, proposes additional tax on the unreported amount plus interest and penalties.

You can respond to a CP2000 and explain why the amounts do not match, but it is simpler to report the refund correctly from the start. The reporting itself does not always mean you owe more tax — it depends on whether you itemized deductions — but leaving it off your return almost always triggers a notice.

When you receive a 1099-G for a refund you did not expect

Sometimes you receive a 1099-G for a state refund you forgot about or did not realize was coming. This often happens when a state processes refunds slowly or when you moved and the refund was delayed. The 1099-G will show the year the refund was issued, not the year you paid the tax.

Report the refund in the tax year shown on the 1099-G, which is the year you received the money. If you received it in 2024, it goes on your 2024 return, even if you paid the state tax in 2023. The year of payment does not matter for federal reporting — only the year you received the refund.

Multiple state refunds or refunds from different states

If you received refunds from more than one state, or if you received both a state income tax refund and a state property tax refund, you will receive a separate 1099-G for each one. Add all the amounts together and report the total on Schedule 1, line 1.

Write a note next to the line if the amount comes from multiple 1099-Gs — for example, "See attached 1099-Gs" — so that if the IRS asks, you have documentation. Keep copies of all your 1099-Gs with your tax records for at least three years.

If your state refund is very small

Some states do not issue a 1099-G unless the refund exceeds a certain amount, often $10 or $25. If you received a refund but no 1099-G, you still have the option to report it on Schedule 1, line 1. You do not have to, but reporting it is the safest approach because it matches what your state reported to the IRS.

If you choose not to report a very small refund, keep documentation showing the amount and the year you received it, in case the IRS asks. Most people report it anyway to avoid any question later.

Frequently Asked Questions

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

Yes, you still report it on Schedule 1, line 1. The IRS requires the report because it received a copy of your 1099-G. Your tax software or the IRS will adjust your tax if you are may have access to to exclude the refund because you did not itemize deductions in the prior year.

What if the 1099-G shows the wrong amount?

Contact your state tax agency and ask them to issue a corrected 1099-G, called a 1099-G with a "corrected" indicator. Once you receive the corrected form, report the correct amount on your federal return. Keep both the original and corrected 1099-G with your records.

Can I claim the state refund as a deduction instead of reporting it as income?

No. The IRS requires you to report it as income on Schedule 1, line 1. You cannot deduct it. The refund is treated as income because it relates to a deduction you claimed in a prior year.

What if I never received a 1099-G but my state says they issued one?

Contact your state tax agency and ask them to reissue it or confirm the mailing address they have on file. If the form was lost in the mail, the state can send a duplicate. You will need the 1099-G to report the refund accurately on your federal return.