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You've called this payment two different things. I think the treatment of it on your Federal return depends on which it is.

If it's a reduction in your Illinois income tax, you treat it as an income tax refund on line 10 of the 1040. It's taxable income to you if you deducted your Illinois income tax paid on your 1999 Schedule A.

If it's a rebate of property taxes, it's line 21 miscellaneous income if you deducted the property taxes on your 1999 Schedule A.

The letter that came with the check states it is an Income Tax Rebate. So it seems it is a rebate, but isn't a rebate a reduction in what I paid in IL income taxes in 1999?

It sounds like the first case to me, but the blurb from the Daily Southtown in the previous post seems to lean toward the second case, because it seems to indicate only those who itemized are affected.

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