State Tax Refund: How to Calculate

If you have paid more to the state throughout the year than your actual tax liability, you are entitled to a refund.

All income made in a particular state is subject to that state's income-tax regulations. Most individuals pay income tax throughout the year by instructing their employer to deduct a specified percentage of their paycheck each period and submit it to the state. Occasionally, an employee will over-pay during the course of the year or pay taxes to the wrong state. In such instances, a refund should be requested by your state for the amount of overpayment.

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Step 1

Determine your gross income. Gross income is the amount of payment that you have received over the course of an entire year before subtracting federal, state or local taxes. Your gross-income amount will be the basis for calculating the amount of state income tax you are required to pay in a given year.

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Step 2

Locate the appropriate state's income-tax rate. The appropriate rate should be determined based upon the state your income was earned in rather than your state of residency. Many people happen to work in the same state in which they live; however, some employees work in or earn commissions based upon sales made in other states. Many states have flat income-tax rates, while others have rates that depend upon your level of income. You can obtain information regarding tax rates by contacting the appropriate state's Department of Revenue (see Resources).

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Step 3

Multiply your state's income-tax rate by your annual gross income. The resulting product is the total amount of income tax that you owe for the year. Calculate the amount of income tax that you paid for the year through withholding or estimated-tax payments. You can locate this amount by viewing your W-2 statement or periodic pay stubs. Subtract the amount you owe in state tax from the total amount that you paid to your state. The resulting difference is the amount of your refund.

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