Background:
I did itemized deduction in 2023 and got CA state tax refund of $4639. Consequently I have received form 1099-G for the same amount.
In 2024 form I enter the 1099-G on the TT desktop application. I have 2 issues:
1. TT form entry issue:
My 1099G form has only box 2 and 3. The TT software gives option to select type of payment received— I see “taxable grant” and “business or farm tax refund” as the most relevant selections—- none of which directly mention my case ie.. state tax refund. Anyways, I proceed with “taxable grant” option but TT says taxable grants should be read out from box 6 of 1099-G…. However, I have only 2 boxes in my tax 1099G tax form!
2. 1099G impact issue:
If I do enter the tax refund if $4700 to TT box 6, I see my federal tax increase by $1700 and state tax increases by $500.
Since 1700/4700= 35% approx I am curious what is the math behind this amount? Are taxable refunds taxed at 35%?
