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I had a refund or credit on my 2016 Federal taxes. I decided not to take it but put it towards the following year 2017. However the next year it did not come up while doing taxes. So a month after doing my 2017 taxes in 2018 I got the Federal refund even though I was not expecting one. So now, how do I deal with this in 2018 taxes. How do I count this in my State taxes? Do I have to count this as income on 2018 ? I itemized and I might also be getting a refund this year in addition to the previous year.

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    Just to be safe please specify the state, though I expect that the actual state doesn't matter.
    – mhoran_psprep
    Mar 29, 2019 at 10:01
  • Generally, a refund is only taxable if you gained a deduction from the original thing that you got a refund for, so a federal tax refund would only be taxable for state tax purposes if you were able to deduct federal taxes you paid, from your state taxable income on your state tax return. I am not aware of states where you can deduct federal taxes; are you able to do that in your state?
    – user102008
    Mar 29, 2019 at 18:13
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    @user102008, Oregon allows deducting federal tax up to something like $6000, so if the refund reduces net federal tax to less than that, the refund is an addition to Oregon taxable income.
    – prl
    Mar 29, 2019 at 21:03

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How do I count this in my State taxes?

Any Federal taxes you pay by payroll deduction, or when you file your Federal return; and any refunds you receive when your file your federal return, or any credits you put towards your federal taxes the next year have no impact on your state taxes.

Individuals don't get a deduction for taxes they pay to the federal government while doing their state return. That also means that if they get a federal refund they don't have to account for it on their state taxes.

Do I have to count this as income on 2018 ?

In the past many people who itemized on their federal taxes did include a deduction on the federal return for their state taxes they paid. If they did get a state refund, or have to pay state taxes, when they filed in April X did have to account for this income or expense when they filed their federal return in April X+1.

The new tax laws for 2018 did change the number of people who are itemizing on their federal returns this April, but any state refunds from last year still have to be accounted for.

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    Oregon allows a subtraction for federal tax, and thus may require an addition for a refund. Normally the subtraction is computed after the federal tax is, so refunds for the previous tax year don't have to be added, but in the case described in the question, it would be.
    – prl
    Mar 29, 2019 at 21:07

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