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Is there anytime that a federal or state refund can be taxed?

On your Federal return your state refund may be taxable income. Oversimplified, if you previously took a Schedule A deduction for the amount refunded, you have taxable income in the amount of the refund. Details are in the instructions for line 10 of the 1040.

I've heard that there are states that allow deductions for some income taxes and, thus, tax refunds, but you'd have to check your state's instructions to see what its rules are. Look for anything that talks about adjusting Federal numbers.

Phil Marti
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