@mrwzzrd wrote:
In Pub 525 under state tax refund, it states that the maximum refund that you may have to include in income is limited to the excess of the tax you chose to deduct for that year over the tax you didn't choose to deduct for that year.
You are misreading Pub. 525. The sentence you are referring to applies to the choice of deducting either state income tax or sales tax. What it is saying is that, if you deducted state income tax in 2018, the maximum refund that you may have to include in income in 2019 is limited to the excess of state income tax (the tax you chose to deduct) over the amount of sales tax that you could have deducted (the tax you didn't choose to deduct). That's probably a lot more than $2,000.
The rules for calculating the taxable amount of an itemized deduction recovery are long and very complicated. They cover about four pages in Pub. 525. You can't reduce those rules to one sentence. Read the whole section on recoveries very carefully.
@mrwzzrd wrote:
I was NOT able to deduct all of my state taxes of $132,000.
If your income or property value is so high that you paid $132,000 of state tax, you should be having your tax return prepared by a professional, not doing it yourself with TurboTax.
