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TAX TIPS
Tax-Free State Tax Refunds
by Kevin McCormally

If you got a state tax refund last spring, you should also have received a form 1099 from your state reminding you about that check. And, the good people in your state capital also sent a copy to the IRS. Usually, when you get a 1099 -- showing interest from a bank, say, or mutual fund payouts -- you have to report the amount as taxable income.

But for the vast majority of taxpayers, a state tax refund is tax-free money.

How do you know where you stand?

Well, if you are among the 70% or so of taxpayers who did not itemize deductions on your 2002 federal tax return, the state refund is totally tax free. Even if you did itemize, there's a chance part of it is tax free. Take the time to run through the worksheet you'll find in the tax instructions. It won't take long, and it might save you money.