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In 2003 I paid a little AMT, so I believe it is safe to not declare this refund as income, as my Schedule A deductions were trashed by AMT. Is it correct that if you pay any AMT at all, it means that your usual Schedule A deductions don't count at all (except for the few that AMT allows, of course)?

That's not quite right. You don't lose all of your itemized deduction. You only lose taxes and misc deductions. Medical deductions need to be adjusted for a 10% of AGI threshold in place of the usual 7.5%. Mortgage may need some tweaking if you have refinanced since your purchase.

But back to your issue.

What you really need to do is recalculate your amended 2003 return as if you had not deducted the portion of the income taxes that were refunded. Then compare that to the amended return as you filed it to see if the taxes provided any benefit. If they did not, then the refund is not taxable.

Second item: The state sent along some interest as part of the refund check. I believe that there is no excuse not to declare the interest. Right?

Right.

--Peter
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