I am nonresident alien student in US from India and filing 2016 federal tax using 1040-NREZ. I used itemized deductions in 2015 federal taxes (standard deductions). I received state tax refund last year. Line 4 of 1040-NREZ is :

Taxable refunds, credits, or offsets of state and local income taxes.

When I checked instructions for 1040-NREZ, it says

If you were a student or business apprentice from India in 2015 and you claimed the standard deduction on your 2015 tax return, none of your refund is taxable.

Is "none of your refund" referring to both state and federal tax returns?

Instructions for 1040-NREZ:

If you received a refund, credit, or offset of state or local income taxes in 2016, you may receive a Form 1099-G. If you chose to apply part or all of the refund to your 2016 estimated state or local income tax, the amount applied is treated as received in 2016.

So clearly federal tax refund is not taxable for me. But what about state tax return? I did not receive form 1099-G. I tried searching pub 525 itemized deduction recoveries, but it is confusing to me.

I found these questions:

Are tax federal or state tax refunds taxable in the next tax year? It says state tax return is taxable. It is so for residents or for nonresidents as well?

Is Maryland's Wynne Tax Refund taxable on my federal return? I couldn't figure out everything. I am guessing the question was aimed at US residents.

Can someone comment here?

1 Answer 1


Federal income tax refunds received during 2016 are not taxable income for 2016 (or any other year) on either the Federal or the State tax return.

The State income tax refund for 2015 received during 2016 is not taxable income on the State tax return for 2016. It is taxable income on the Federal tax return for 2016 only to the extent that you received a tax benefit (reduction in Federal income tax due) from deducting State income tax as an Itemized Deduction on your 2015 Federal return. If you didn't deduct State income tax because you deducted State sales tax instead, then the State income tax refund is not taxable income on the Federal tax return.

  • As mentioned in the original post, I only had standard deduction (under US-India tax treaty). There was no itemized deduction of sales or state tax. In this case, is state tax refund issued in 2016 is not taxable for federal tax in 2016, right?
    – user53117
    Feb 4, 2017 at 23:56
  • 1
    @user53117 To quote from your question, "I used itemized deductions in 2015 federal taxes" and so I assumed that you used Itemized Deductions as the term is used in US tax law. If you used the standard deduction, then , Yes, the state tax refund that you received in 2016 is not taxable income for Federal income tax purposes, and it is not taxable income for State purposes either. Feb 5, 2017 at 2:57

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