Working on my returns now. So far, the IRS owe me exactly $1. But someone please explain to me why my state tax refund from last year is included as income on my return. It was repayment for overpaying taxes last year.
If you took the full amount of state taxes paid as a deduction against your federal income taxes, but a portion was returned to you, that portion is taxed to reduce the deduction to the correct amount .
Working on my returns now. So far, the IRS owe me exactly $1. But someone please explain to me why my state tax refund from last year is included as income on my return. It was repayment for overpaying taxes last year.
If you took the full amount of state taxes paid as a deduction against your federal income taxes, but a portion was returned to you, that portion is taxed to reduce the deduction to the correct amount .