Yes, you still
need to include the MD tax refund as income on your Federal return.
If you used itemized deductions in 2016, then the MD tax
refund will be included as income. If
you used the standard deduction, then the refund will not be taxed.
If you are using itemized deductions on your 2017 tax
return, then the balance due that you paid to VA may be included as a
deduction. That way, it will offset the
income from the MD tax refund.
To go to the section of the
tax return to enter the VA balance due, use these steps:
-
On the top row of the
TurboTax online screen, click on Search (or for CD/downloaded TurboTax
locate the search box in the upper right corner)
-
This opens a box where you
can type in “state balance due paid” (be sure to enter exactly as shown
here) and click the magnifying glass (or for CD/downloaded TurboTax,
click Find)
-
The search results will
give you an option to “Jump to state balance due paid”
-
Click on the blue “Jump
to state balance due paid” link
-
Scroll to the bottom of the
screen until you see Other Income Taxes
Paid in 2017
-
Click Start or Update beside Balance due on your 2016 state taxes paid
in 2017
