Is my state refund taxable income if I itemized my federal tax return?
It is possible that your state refund is taxable income. You may need to claim all or part of it if:
- You received a state or local income tax refund, credit, or offset.
- You itemized deductions on your federal income tax return.
You had the option to choose to deduct either state and local income taxes or general sales taxes. If you chose general sales taxes, none of your refund is taxable.
If you chose state and local income taxes, your state refund is taxable. However, it’s only taxable to the extent that it’s more than the refund you would have received by choosing the larger refund from these:
- Standard deduction
- General sales tax
If you earn income in Arizona, it’s likely you will have to pay Arizona income tax. And with that, comes completing and filing Arizona tax forms.
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