I made a charitable contribution to a Certified School Tuition Organization in Arizona that allows me to get a credit for Arizona state taxes. According to IRS rules, I cannot get both a deduction from federal taxes and a credit from state taxes for this charitable contribution. So I removed that as a charitable contribution in my federal taxes in TurboTax. However, under its SALT "safe harbor" rule, the IRS says in this situation rather than list the contribution as a charitable contribution in my federal return, I should list that charitable contribution as state taxes withheld on schedule A of my federal tax return. See https://www.irs.gov/pub/irs-drop/n-19-12.pdf.
I did that in TurboTax by listing the charitable contribution as an estimated state tax payment to Arizona in my federal return. But when I do that, TurboTax transfers my information from my state return and double-counts my contribution as both state taxes withheld and a state tax credit and therefore gives me a much too big state refund. That's wrong. TurboTax should not be counting the charitable contribution as both a withheld state tax and a state tax credit. How can I fix this problem?
