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Depends on your State. (Some states even try to defy Federal constitution by passing absurd laws.) The following is what i found on the internet:
States that do not tax refund interest paid by the IRS include California, Colorado, Connecticut, Delaware, Florida, Hawaii, Idaho, Illinois, Indiana, Maine, New Jersey, New Mexico, New York, Oregon, Pennsylvania, Rhode Island, and Alaska. Taxpayers in these states generally do not need to report the interest payments received from the IRS on their state income tax returns.
I emailed MassTax Connect ( dept of rev svc website.. Connecting directly to my wallet!!)
They replied quickly that this interest payment is apparently not considered similar to Treasury or Mortgage Bond interest and is subject to state taxes in Massachusetts
I don't understand how one state can tax it and others do not. Isn't this a federal law?
It is not a lot of money but it is the principle. As soon as I finish my taxes I will investigate
This 2019 comment on in intuit/turbotax discussion indicates (without reference, unfortunately) that interest paid on federal tax refunds is state taxable.
Comments
States that do not tax refund interest paid by the IRS include California, Colorado, Connecticut, Delaware, Florida, Hawaii, Idaho, Illinois, Indiana, Maine, New Jersey, New Mexico, New York, Oregon, Pennsylvania, Rhode Island, and Alaska. Taxpayers in these states generally do not need to report the interest payments received from the IRS on their state income tax returns.
MASS dept revenue services doesn't list it. There is a table that is ten years old
They replied quickly that this interest payment is apparently not considered similar to Treasury or Mortgage Bond interest and is subject to state taxes in Massachusetts
I don't understand how one state can tax it and others do not. Isn't this a federal law?
It is not a lot of money but it is the principle. As soon as I finish my taxes I will investigate
https://ttlc.intuit.com/community/after-you-file/discussion/i-received-interest-income-from-the-irs-which-stated-that-it-is-taxable-how-do-i-report-this-thru/00/161186