questionsdo you get taxed on your tax refund?

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Same thing here. Received a state refund from last year now I have to claim that. I'm with you it's ridiculous, money was taxed when I made it, taxed when I spent it and then taxed again!

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Same here as well. My state also charges sales tax on every used vehicle registration regardless of how many times that vehicle has already been taxed.

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You owe fed taxes on the state refund because you originally got a deduction on the amount you told the fed you paid to the state. So you're not double-taxed, you're just correcting an old mistake.

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@samstag: I also get taxed by the state on the state refund. It's not a lot, but there it is...

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This only happens if you itemize. When you itemize on your federal return, you deduct your state taxes withheld. Then, if you get a state refund, that is taxable the next year, becuase you over-deducted the year before.

If you take the standard deduction, this does not apply.

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If you get a refund on your state taxes, that means you paid too much. That money you're getting back was not taxable in the previous year because it was taken out of your paycheck upfront. Now that you got that money back in the form of a refund, it becomes taxable at the federal level. It would be the same if you reduced the amount being withheld from your state taxes (and got no refund) because you would have been part of your taxable income. In other words, you're only getting tax on this income once. It's just a little weird because you get the refund money in the current year from the excess money you withheld for state taxes in the previous year.

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@okham:

I'm curious: in what state do you live?

Here (NY State) it works as explained above by @samstag, @djp519 and @bsmith1: if the federal tax last year was reduced by claiming state and local taxes paid last year as deductions, then any state and local refund from last year was never taxed at the federal level and thus is taxable at the federal level this year. It is not taxed at the state or local levels.

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@baqui63: NC. The more northerly Carolina.

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@baqui63: can you draw me a flow chart please? You know -- pretty colors, cute animals, no more than four numbers.

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Also, that money was from last year, and it is added to the income from this year. Therefore it is taxable income for this year.
This is a tricky biggie here in Kalifornia .If you're being audited, this will come up. And they will associate guilt on your other appeals based on your obvious guilt on not claiming this for at least the last seven years.
This is the part where you negotiate and give in, or get up get walking and get a lawyer.