Refunds of federal income taxes are never taxable because the taxes were not deductible. Refunds of state income taxes may or may not be deductible. It depends on whether the taxpayer itemized deductions and whether the taxes that are refunded produced a tax benefit on the earlier return. Those who claim the standard deduction are never taxed on refunds of state income taxes; those who itemize may or may not have taxable income from the refund.
Tax term for interest on personal loans and consumer purchases. Such interest is not deductible.