Where to Report State Tax Refund on 1040: Schedule 1 and 1099-G

Report the taxable portion of a state tax refund on Schedule 1 (Form 1040), Part I, Line 1, labeled “Taxable refunds, credits, or offsets of state and local income taxes.” That figure is added into your total additional income on Schedule 1, Line 10, and then carried to Form 1040, Line 8.¹ Before you enter anything, though, check whether your refund is taxable at all. Many are not.

Is Your State Refund Taxable

The deciding factor is what you did on the federal return for the year the state tax was paid. If you took the standard deduction that year, the refund is generally not taxable, because the state tax you paid never reduced your federal bill in the first place.² Nothing goes on Schedule 1, Line 1.

If you itemized, look at what you actually deducted. Itemizers choose between deducting state income taxes or state sales taxes, not both. If you elected sales taxes on the prior-year return, your state income tax refund is not taxable. The refund only becomes income if you deducted the state income tax that was later refunded.²

The SALT cap sets a second boundary. Federal law limits the combined itemized deduction for state and local income, sales, and property taxes.³ If your state and local taxes paid in the prior year exceeded that year’s cap, part of what you paid produced no deduction. A refund of that capped-out portion is not taxable.

How Much of the Refund Counts as Income

Even when your refund is taxable in principle, the full amount rarely is. The taxable slice is limited to the actual tax benefit you got from itemizing — how much your itemized deductions exceeded the standard deduction you could have claimed instead. Barely exceeded it? Only a sliver of the refund is taxable.

The IRS walks you through this with the State and Local Income Tax Refund Worksheet in the Schedule 1 instructions.⁴ Pull out your prior-year federal return before you start. The worksheet asks you to:

Enter the refund from Form 1099-G, Box 2, but capped at the state and local income taxes shown on your prior-year Schedule A, Line 5d.
Subtract any SALT cap excess. If your taxes paid on Schedule A exceeded the amount you were allowed to deduct on Line 5e, take the difference out. If the excess is as large as the refund, none of it is taxable.
Compare your prior-year itemized deductions to the standard deduction that was available to you. The taxable portion cannot exceed that gap.

For refunds received in 2025 that relate to 2024 overpayments, the worksheet uses the 2024 standard deduction: $14,600 for single or married filing separately, $29,200 for married filing jointly, and $21,900 for head of household, with an additional amount if you or your spouse were 65 or older or blind that year.⁵

A short example. Say your 2024 itemized deductions totaled $15,100 and your standard deduction was $14,600. The gap is $500. If your 2024 state refund was $2,000, only $500 is taxable — the actual benefit itemizing gave you.

Entering the Amount on Schedule 1 and Form 1040

Form 1099-G from your state tax agency shows the refund in Box 2.⁶ That is the starting figure. What you actually report is the taxable portion from the worksheet, which can be less than Box 2.

Schedule 1, Part I, Line 1. Enter the taxable portion of the refund. If all of it is taxable, that equals Box 2. If only part is taxable, use the worksheet result.¹
Schedule 1, Line 10. Add Lines 1 through 7 and Line 9, and enter the total.¹
Form 1040, Line 8. Transfer the Schedule 1, Line 10 total here.¹

Where Local Refunds Go

Refunds of local or municipal income taxes follow the same rules and belong on the same line. Schedule 1, Line 1, covers state and local refunds together.⁵ Combine the taxable portions from each and enter one figure.

Interest Paid on a Delayed Refund Goes Somewhere Else

If your state paid interest on a late refund, that interest is taxable federal income no matter what — even if the refund itself is not taxable because you took the standard deduction.⁷ The state may report it on Form 1099-INT. Report it on Form 1040, Line 2b as taxable interest, not on Schedule 1, Line 1 with the refund.⁵

Missing or Incorrect 1099-G

States must issue Form 1099-G for refunds of $10 or more. If yours has not arrived, contact the state tax agency directly to request a copy; many states also post the form in an online account portal. If you still have nothing by the end of February, call the IRS at 800-829-1040 and they will contact the agency for you. Have your name, address, Social Security number, and the state agency’s contact information ready.⁸

If the filing deadline arrives and you still have no 1099-G, you are still required to report a taxable refund. Look up the actual refund on your prior-year state return or your state tax account, use that number in the worksheet, and file Schedule 1 accordingly. If a corrected 1099-G later shows a different figure, amend the return.

If a 1099-G reports a refund you never received, which can happen with identity theft, contact the issuing state agency and request a corrected form.

What Happens if You Skip It

The IRS receives a copy of every 1099-G your state issues, so a missing entry is easy to catch. Leaving out a taxable refund creates an underpayment. If the shortfall is large enough to be a substantial understatement — generally the greater of 10 percent of the tax due or $5,000 — the IRS can assess a 20 percent accuracy-related penalty on the underpaid amount.⁹ Interest accrues on the balance from the original due date. Running the worksheet and entering the result on Schedule 1, Line 1, avoids both.

1
Internal Revenue Service. Schedule 1 (Form 1040) 2025
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Internal Revenue Service. IRS Issues Guidance on State Tax Payments
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Internal Revenue Service. 2025 Instructions for Schedule A (Form 1040)
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Internal Revenue Service. Instructions for Form 1040 – Section: Line Instructions for Schedule 1 Additional Income and Adjustments to Income
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Internal Revenue Service. Instructions for Form 1040 (2025)
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Internal Revenue Service. Instructions for Form 1099-G (Rev. March 2024) – Section: Box 2. State or Local Income Tax Refunds, Credits, or Offsets
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Internal Revenue Service. Topic No. 403, Interest Received
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Internal Revenue Service. What to Do When a W-2 or Form 1099 Is Missing or Incorrect
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Office of the Law Revision Counsel. 26 U.S. Code 6662 – Imposition of Accuracy-Related Penalty on Underpayments