tax question

[juliebean]

I've been working through our taxes using taxact.com - first time I've done them online. Prior years I've always listed the prior years state refund on the front page as income and the current years state tax withholding on the itemized deduction page.

There isn't an explaination, but taxact is saying I do not have to list last year's state refund as income, but it still let's me list the state tax withholding on the itemized deduction page. This just seems wrong...

I would love to not have to pay taxes on that state refund, but I also want to make sure I am doing this right. Any assistance is appreciated!

 

[sam_gordon]

First year I've done Tax Act too and had trouble finding it, but it's easy... login and click the tab for 'Federal Q&A'. Under 'Select Topics Myself', left hand column, about 2/3 of the way down... 'State Income Tax Refund'.

 

[ancestry]

I use Tax Act too and have for years. I have always been required to put our refund from the prior year down as income. In fact Tax Act does it automatically for me since I always allow it to import the prior year's information.

Your state should send you a from 1099-G for any refund you received the previous year. You enter the info from the 1099-G into the appropriate place in Tax Act.

 

[juliebean]

Thank you both - I will look for that info on the website. Not sure why, but have received the state form, it seems like I should have it by now... Want to get these done, but turns out the IRS isn't doing itemized forms until 2/14 anyway, so I guess there's no rush! Thank you!

 

[imsayin]

You need to list last year's state tax refund as income this year IF you itemized last year and included "state income tax" on your schedule A. If you didn't itemize or took a sales tax deduction instead of the state income tax deduction, the refund is not taxable this year.

Basically, you take the deduction one year on the schedule A, and if you get a refund, you pay taxes on it the next year. The deduction is based on what you had withheld the year you are filing for, so it includes the amount you get back.

 

[deva]

Basically, you take the deduction one year on the schedule A, and if you get a refund, you pay taxes on it the next year.

If you do not get a benefit for the deduction, then the refund is not taxable. If you are subject to AMT, state taxes are not deductible (even if you itemize and file Schedule A), so the refund is not taxable.

This is a pretty complex calculation by hand, but tax software will calculate for you by entering a few numbers from your prior year return.