In 2020, Clark filed Form 1040 for the 2019 taxable year. Clark did not itemize his deductions. In 2020, Clark received a state income tax refund of $900 plus interest of $10 for overpayment of 2019 state income tax. What amount of the state tax refund and interest is taxable in Clark's 2020 federal income tax return?

A. $0

B. $10

C. $900

D. $910

correct option is B. $10

Explanation:

given data

state income tax refund = $900

interest over payment = $10

solution

we know that Federal and the state income tax refund is an excluded from taxpayer taxable income to extent

so that here refund will not reduces amount of tax for given earlier year

so here amount of state tax refund and the interest is taxable in Clark 2020 federal income tax return is $10

so here correct option is B. $10