State Tax Refunds Report: It’s critical to keep up with significant developments that might have an impact on your tax bill as tax season gets underway.
Every year, tax laws are revised to account for inflation as well as possible last-minute changes from Congress that may affect your tax return for the 2023 tax year.
State tax refunds are generally not required to be included in federal income for tax reasons.
You probably won’t owe federal income tax on state tax refunds if you choose to take the standard deduction on your federal income tax return.
In the 2021 tax year, a sizable 90% of people used the standard deduction.
But only if you have already subtracted the state tax paid from your income must you include any state tax refund you get when you itemise deductions.
State Tax Refunds Report
This is due in part to the $10,000 cap on state income and property tax itemised deductions, which may exclude certain itemizers from having to report their refund as income.
However—and there is a big “but”—if certain requirements are satisfied, your state refund may constitute taxable income.
You were given a refund, credit, or offset for state or local income taxes.
You filed your federal income tax return itemising deductions.
Your state rebate becomes taxable if you choose to pay state and local income taxes rather than general sales taxes.
The amount that is taxed is just that which is more than what you would have gotten if you had opted for general sales tax or the standard deduction.
The IRS usually won’t contest the taxability of any state tax rebates, inflation relief checks, or other special payments you got in 2023.
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Certain state payments, such as Minnesota Walz checks and Arizona Families Tax Rebates, are an exception to this rule and are regarded as taxable income.
Monday, April 15, is the last day to file your 2023 tax return or to request an extension.
If you are in possession of a valid extension, October 15, 2024 is the new due date.
Those that file early should make sure they have all the required data before submitting.
The IRS stresses that the quickest method to get any overdue refunds is by direct deposit, and that you should visit IRS.gov to get rapid access to refund information and answers to frequently asked tax issues.
It is wise to consult a tax expert before completing your federal return if you are unsure if special state payments are taxable.
