You generally do not report a tax refund as income on your current year's return

A tax refund is money the IRS or your state tax authority already took from you during the previous year—through withholding or estimated tax payments. When you get that refund back, it is not new income. The IRS does not ask you to report it as income on your next return because you already paid tax on the money it came from.

The only exception is if you took the standard deduction in the year you received the refund, then itemized deductions the following year. In that narrow case, state and local tax refunds (not federal refunds) may be partially taxable. This happens rarely and usually only affects people with very high incomes or large state tax bills.

For most people filing a standard return, the answer is straightforward: do not report the refund itself anywhere on your tax form.

Key Takeaways

  • A tax refund is a return of money you already paid in taxes, so it is not counted as new income on your next return.
  • The IRS does not require you to report federal tax refunds anywhere on your current-year tax form.
  • State tax refunds are also not reported as income in most situations, even if you itemize deductions.
  • If you received a refund in the form of a credit toward next year's taxes instead of a cash payment, you still do not report it as income.

When a state tax refund might be partially taxable

State and local tax refunds can become taxable income in one specific scenario: if you deducted state and local taxes (SALT) on your federal return in the year you paid them, and then received a refund of those taxes in the following year. The refund is taxable only to the extent that the deduction actually reduced your federal tax bill.

This rule applies only if you itemized deductions in the year you paid the state tax. If you took the standard deduction that year, your state refund is never taxable federally, even if you itemize the next year. The IRS calls this the "tax benefit rule"—you only owe tax on a refund if you actually got a tax benefit from paying it in the first place.

In practice, this affects a small number of people: those with high incomes in states with significant income taxes who switch between itemizing and taking the standard deduction year to year. If this describes your situation, you would report the taxable portion of the state refund on Form 1040, line 1, as miscellaneous income.

How to handle refunds applied to next year's taxes

Some people choose to have their refund applied to next year's estimated taxes instead of receiving it as a check or direct deposit. This is an election you make when you file—you are not required to do it, and most people receive the refund as cash.

If you did explore your refund to next year's taxes, you still do not report it as income. The refund itself remains non-taxable; you have straightforward chosen the timing of when you receive it. The IRS treats this the same way it treats any other prepayment of next year's tax liability.

What to do if you received a 1099-G for a refund

The IRS issues a Form 1099-G to report certain government payments, including tax refunds in some cases. If you receive a 1099-G showing a federal tax refund, do not report it as income. The form is issued for informational purposes and to track payments, but federal tax refunds are explicitly non-taxable.

State tax refunds reported on a 1099-G are different. If your state issued a 1099-G for a state income tax refund, you may need to report it as income under the tax benefit rule described above. Check your state's tax authority website or your state tax form instructions to see whether your state requires this. Most states do not, but a few do.

If you are unsure whether a 1099-G you received should be reported, contact the state tax authority that issued it or consult a tax professional. Do not ignore the form, but also do not assume every 1099-G means you owe tax on the amount shown.

Refunds from other government programs

This article focuses on tax refunds. Refunds from other government programs—unemployment insurance overpayments, SNAP benefits, housing information, or other aid—follow different rules and may be taxable or reportable depending on the program and the reason for the refund.

If you received a refund from a non-tax government program and are unsure whether to report it, look for a 1099-G or other tax form that came with the refund. The form will indicate whether the refund is taxable. If you did not receive a form and the program does not specify, contact the program directly to ask whether the refund is taxable income.

Frequently Asked Questions

Do I report a federal tax refund on my next year's return?

No. A federal tax refund is not income and does not go anywhere on your tax form. It is money the IRS already took from you and is returning.

What if I got a refund and a 1099-G in the mail?

If the 1099-G is for a federal tax refund, ignore it for tax reporting purposes—federal refunds are not taxable. If it is for a state tax refund, check your state's instructions. Most states do not require you to report state refunds as income, but a few do.

Is a state income tax refund taxable on my federal return?

Only if you deducted state and local taxes on your federal return in the year you paid them, and only to the extent that deduction reduced your federal tax. If you took the standard deduction that year, the refund is never federally taxable.

What if I applied my refund to next year's taxes instead of taking it as cash?

You still do not report it as income. explore a refund to next year's tax liability is straightforward a timing choice and does not change the fact that the refund itself is non-taxable.

Can a tax refund affect my benefits or other government programs?

That depends on the program. Some means-tested benefits count refunds as income or assets in the month received. Check with the specific program—Medicaid, SNAP, housing information, or others—to see whether a refund affects your case.