Question

Help with potential itemized deduction recoveries

Forum|Forum|3 years ago
March 20, 2023
1 reply
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Hi,

I'm helping a friend with their taxes. For tax year 2021, he filed MFJ, and for 2022, he's filing single. He received a $2,700 state tax refund relating to 2021 taxes. He should not normally have to claim this as his disallowed SALT deduction (~$9,400) was greater than his state tax refund, but his filing status change created an exception (#9). This requires me to go to Publication 525 and specifically the part around itemized deduction recoveries (page 25). If I follow worksheet 2a (from Pub 525), then I get to the same spot (of not needing to claim prior year tax refund as income), but I'm not really sure where the filing status change comes into play. Would really appreciate some guidance here.

J

JulieS

Yes, based on what you said, the state refund would not be taxable, but it is best to complete the worksheet inside the TurboTax return to document this. Since this a refund from a joint return, enter half of the amount for each entry.

Open the return and select Federal on the left side menu.
Select Income & Expenses.
Scroll down the list and find the section called Other Common Income, expand the section.
Click Start or Revisit to the right of Refunds Received for State/Local Tax Returns.
On the screen titled, State and Local Tax Refund Summary, click Edit to the right of the state name and refund, or click + Add state or local refund.
Complete next few screens with information from your 1099-G.
Keep going until you get the result.