topic State Tax refund taxable? in Get your taxes done using TurboTax

State Tax refund taxable?

DebV — Wed, 05 Feb 2020 18:16:45 GMT

Last Year, I received a state tax refund. Turbo Tax carried the amount of the refund into my income this year. But I didn't itemize deductions. I took the standard deduction. Am I doing something wrong?

Re: State Tax refund taxable?

DawnC — Wed, 05 Feb 2020 18:38:15 GMT

No, you are not doing anything wrong. But you may need to go through that section and answer some follow-up questions. TurboTax will include the amount in your total income, but that does not mean it is included in your taxable income.

When you answer the follow-up questions in the 1099-G, state and local refunds, the income will be determined to be NOT taxable, but until you answer those questions, it will show as taxable. After you answer the questions and look at your Form 1040, the amount of the refund should not show up as taxable.

Only if all three of the following are true, your refund counts as taxable income:

You itemized deductions last year, instead of taking the standard deduction
You claimed state and local income taxes (not general sales taxes)
Claiming the deduction helped you increase your federal refund or lower your tax bill

Re: State Tax refund taxable?

sho20bhit — Wed, 04 Mar 2020 05:20:03 GMT

I did itemize my deductions for 2018 and still after answering all the questions in turbotax this year, its saying my state refund of 2018 that I received in 2019 is tax free for 2019? FYI: As per schedule A of 2018 , my state tax (20k+) and real estate taxes around 8k so total around 30k which got capped to 10k on line 7. However total itemized deduction was mortgage interest + charity + 10k which was greater than standard deduction , hence itemized. Is turbotax making a wrong decision?

Re: State Tax refund taxable?

DawnC — Wed, 04 Mar 2020 13:07:41 GMT

No. TurboTax has determined that your state refund (because of the cap) did not provide an additional tax deduction. Had you been able to deduct the full amount, the refund would have been considered taxable. See this IRS explanation for more details. @sho20bhit