Do I have to include the amount reported on my Form 1099-G, (State Tax Refund) as taxable income on 2007 Federal 1040 Form?

1. If you did not itemize your deductions on your Federal tax return for the same year that the state tax refund applies to, you are not required to report any of the state refund reported on Form 1099-G as income on the Federal Tax Return.

In effect, the State Refund is not subjected to Federal Tax.

2. If, however, you received a refund of state income taxes this year that you elected to take an itemized deduction for in an earlier year, generally speaking, you would be required to include the refund reported on Form 1099-G on the Federal Tax Return.

In effect, the State Refund is subjected to Federal Tax.

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