A state income tax refund received during the current tax year may be taxable at the federal level if the taxpayer claimed an itemized deduction for state and local taxes on the prior-year federal return and received a tax benefit from that deduction.

If the taxpayer claimed the standard deduction on the prior-year return, the state tax refund is generally not includible in federal taxable income because no federal tax benefit was derived from the payment of state income taxes.

When determining the taxability of a state refund, preparers should consider the tax benefit rule and evaluate whether the prior-year deduction resulted in a federal tax benefit to the taxpayer.

To report Form 1099-G State Refund Document in the TaxAct program, follow the steps below. 

TaxAct Online

Dashboard

1. From within your TaxAct return, click Income.
   • On smaller devices, click the menu at the top left corner of your screen, then make your selection.
2. Click the Explore More drop-down.
3. Click Add beside State/Local Tax Refunds. 
4. Complete the rest of the interview process. 

Classic

1. From within your TaxAct return, click Federal. 
   • On smaller devices, click the menu at the top left corner of your screen, then make your selection.
2. Click State Income Tax Refund.
3. Complete the rest of the interview process. 

Desktop

1. From within the TaxAct return, click Federal. 
2. Under Income, click State Income Tax Refund.
3. Complete the rest of the interview process. 

Related Links

• Individuals – State Tax Refund – Received in Current Year for Last Year’s State Return