Do I get taxed next year on the tax refund that I got this year? Is that why they say it's good to break even and not receive a refund at all??
2007-02-19 07:42:17 · 5 answers · asked by Jenna S 2 in Business & Finance ➔ Taxes ➔ United States
No your Federal Tax refund is not taxable, if you itemize your deductions and deduct what you paid in State Taxes, and then get a refund on a portion of what you deducted, you would have to claim the State refund.
The reason to try to break even with your Federal withholding is that it keeps the money in your pocket during the year, rather than sitting with the IRS all year long interest free
2007-02-19 07:49:43 · answer #1 · answered by stuart 3 · 2⤊ 0⤋
You don't get taxed on a federal refund. If you itemize one year and claim state income tax as an itemized deduction, then get a state refund, you have to claim it the next year as income.
The reason it's good to break even is that if you receive a refund, you've made an interest-free loan of that much money to the government for the time they had it until you got it refunded.
2007-02-19 21:34:22 · answer #2 · answered by Judy 7 · 0⤊ 0⤋
If you get a tax refund from the IRS (i.e. Federal Government), it is never taxable. If you get a refund from a state or city income tax it is possible that you have to show it as income. Here are the circumstances when you have to do that: IF you itemized deduction LAST year, and IF you itemized the total state or city income taxes WITHHELD and then got a refund (because too much was withheld), then the amount of the refund is shown as taxable income in the year you receive the refund. I know that sounds complex, but it really isn't and it is totally fair, because you effectively overstated your deduction for taxes when you did the itemized taxes. This is quite normal and perfectly legal. Just don't forget to put the refund on the following year's tax return.
2007-02-19 16:38:48 · answer #3 · answered by Ovrtaxed 4 · 0⤊ 2⤋
You DO NOT pay taxes on any federal refund you receive. It is NOT claimed as income on next year's return.
2007-02-19 15:46:11 · answer #4 · answered by Anonymous · 0⤊ 3⤋
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2007-02-22 17:28:13 · answer #5 · answered by ellen h 2 · 0⤊ 0⤋