You can only deduct the taxes paid on the income in 2021. Using the portion of income derived from investment multiplied by the total state tax paid in 2021 is a method the IRS considers reasonable. If you owed taxes after filing 2020 taxes, you can enter the amount of state tax paid in 2021. To do this:
- Click Start/Revisit in the Federal > Deductions & Credits > Estimates and Other Taxes Paid > Income Taxes Paid section of your return.
- Enter the amount you paid on your 2020 return in the Other Income Taxes Paid in 2021 > Balance due on your 2020 state taxes paid in 2021
