Form 8960 Line 9b 2021

[Ricker]

TurboTax 2021 will not allow me to enter Investment Expenses Allocable to Investment Income for state taxes paid on line 9b (Form 8960, Part II).  I see where there is an itemized deduction limitation on the worksheet and ultimately total deductions are limited to 2% of AGI.  I used the standard deduction, but I don't see where that matters.  Example:  $250k investment income, $8K state income tax, but limited to $5K AGI.

No deduction or modification of Net Investment Income Tax was calculated so I tried to enter in Forms mode, but it just switches back to the Schedule A for State Tax which I have entered correctly.  I would like to understand if TT has a reason that they do not allow this adjustment to be made.

[AmyC · Accepted solution]

Yes, it is not allowed through 2025. It will reappear in 2026. You can read this on the line 9b instructions here.

[Ricker]

Thanks for sending that.  I agree with you. 

It would be so much more clear if they simply referred to each line item as indicated on the form.  There are separate lines on form/worksheet for investment interest (9a), taxes (9b), and miscellaneous investment expenses (9c).   Then after the instructions for both 9a and 9b and just before the instructions for 9c, they make the warning statement that "Miscellaneous itemized deductions are suspended for tax years 2018 through 2025. Miscellaneous itemized deductions under section 67 aren’t allowed for tax years beginning after 2017 and before 2026."

I think a reasonable person could interpret "miscellaneous itemized deductions" as those on line 9c.  Why couldn't they just say investment interest and taxes specifically are suspended as well as miscellaneous itemized deductions?