While completing our federal and state tax returns for 2021, I came upon something that may be of interest to others who are also working on their taxes.
We used Turbotax Deluxe Federal and State for our taxes. This year Turbotax recommended that we use the standard deduction for our federal tax return. This was a surprise because we’ve always used the itemized deduction in the past. Another surprise was the size of our state tax refund. It was over $1000 less than 2020’s, even though withholding and income hadn’t changed significantly.
I redid our returns, this time forcing Turbotax to use itemized deductions instead. The result was that our federal refund decreased by over $200, but our Virginia state refund increased by over $770. The total federal plus state refund increased by more than $560. If I had gone with Turbotax’s recommendation we would have paid more in taxes and gotten a much smaller overall refund.
I hope this information helps others save money on their taxes. Unfortunately, you may have to choose between overpaying your state taxes or overpaying your federal taxes to get the best overall outcome.
