I received a $3,000 state income tax refund in 2020 for overpayment in 2019. I itemized in 2019. However, my 2019 SALT bill was $36,000, of which I could only deduct $10,000. As I read IRS Revenue Ruling 2019-11, the state income tax refund is NOT taxable for me in 2020 because I received no benefit from the deduction in 2019. (My county property tax was $13,000 which far exceeds the SALT $10,000 max). When I add the $3,000 state income tax refund into turbo tax, my taxes owed goes up. How do I get turbo tax to understand this income is not taxable in 2020? Turbo Tax did ask the following question: “Total of all your payments and withholding” I entered my 2019 State tax withheld ($22K). I entered my total 2019 SALT withheld ($36K). Result was the same, Turbo Tax said I owed tax on the refund.
