A non-Taxable State Refund is showing up as a deduction on schedule A.
Taxes were itemized in 2024 and SALT cap limited. The excess over the cap is more than the refund. In this case there was a state payment with the state extension in 2025. TurboTax correctly determined that the refund was not taxable ("above the AGI line)".
The IRS Instructions for Schedule A line 5a state (emphasis added):
"Don't reduce your deduction by any:
State or local income tax refund or credit you expect to receive for 2025; or
Refund of or credit for prior year state and local income taxes you actually received in 2025. Instead, see the instructions forSchedule 1 (Form 1040), line 1."
The TT treatment would make the refund taxable "below the AGI line" if one was below the new SALT cap and itemizing in 2025.
Another Tax Software program does not make the schedule A deduction.
1) Which is correct?
2) If TT is in error, how to fix?
