Amending 2017 taxes turbotax3/17/2024 Sales Tax Deducted, But Not State Income Tax? For instance, if you didn’t itemize your deductions last year and instead you took the standard deduction, then your state tax refund from the previous year is tax-free this year. So, why is this happening? What gives?īefore we go into that, know that there are times when your state and local tax refund is not taxable – we’ll dive into this scenario first.Ī general rule of thumb: If you didn’t deduct state and local income taxes last year, you don’t need to pay taxes on your state and local tax refund this year. First, you get to take a deduction of your state and local taxes, then all of a sudden the next year you get a Form 1099-G from your state and you’re paying taxes on your state and local tax refunds. For those who itemize their deductions, it’s one of the stranger parts of the tax code.
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