@Dawgs_3102 as outlined earlier in this thread, there are two paths to take to get back the tax on the $40k. However, the way to determine that path is really easy. (My comments assume you are in the same tax bracket for both years and you are filing Single in both years).
1) if you are going to Itemize your deductions in 2023, without this situation, then the path is simple. Add $40k to Schedule A and your tax is reduced by $40k times your tax bracket. Easy and Simple.
2) If you are otherwise going to take the Standard deduction in 2023, then the more conplicated path is the way to go. Why? Because if you were to simply add $40k to Schedule A (and to demonstrate the point, assume there are no other expenses that could be itemized), then your tax is only reduced by $40k less the standard deduction of $13,850 or about $26k times your tax bracket. You were going to get the first $13,850 anyway, so the marginal increase in the deduction is only $26k - not $40k as in 1). In this case, the way to get all the tax back is to go down the more complicated path.
make sense?
