topic Why does Turbo tax show $0 tax on my $723 State refund in 2020? in Get your taxes done using TurboTax

Why does Turbo tax show $0 tax on my $723 State refund in 2020?

ryandoubt — Thu, 18 Mar 2021 02:26:48 GMT

State of Louisiana

Re: Why does Turbo tax show $0 tax on my $723 State refund in 2020?

MichelleLO — Fri, 19 Mar 2021 19:07:49 GMT

To clarify, did you already file your return then the amount changed in TurboTax? Or did this occur while completing your state return?

Re: Why does Turbo tax show $0 tax on my $723 State refund in 2020?

ryandoubt — Fri, 19 Mar 2021 19:26:41 GMT

I've timely used Turbo Tax the past 3 years and LA state refunds have always been taxable. This 2020 year Turbo Tax showed my 2019 refund but I had to manually insert my state tax refund received in 2020. Even with Turbo showing the tax amount I inserted for 2020 that amount does not show up as taxable income.

Re: Why does Turbo tax show $0 tax on my $723 State refund in 2020?

DanielV01 — Fri, 19 Mar 2021 20:03:20 GMT

Your LA state refund will be taxable when both of the following are true:

You itemized deductions on the Federal return instead of taking the standard deduction, and
The state refund included an amount that was used as part of the itemized deductions.

In years past, it was a virtual given that if you itemized on your Federal return, you would have state refund to add back in, because state, local, property and real estate taxes were all included to determine itemized deductions, and the amounts that were allowed to be included were not limited. But the Tax Cuts and Jobs Act in 2017 changed that. Beginning that year, State and Local Taxes (including real estate and property taxes), were capped for itemized deductions at 10,000 (even for a married couple filing jointly).

What this means is that, even if you itemized (not a given, since the threshold to do so last year was 24,400 if Married Filing Joint, 12,200 if Single), you still won't include any of the tax refund as taxable income if your total SALT deductions were $10,723 or more, because you would have only been allowed to claim a maximum of 10,000 ("SALT"ed out is the expression I like to use). Since we can't see your screen, we can't guarantee that this is the reason why your state refund is not taxable. But it is the most likely explanation, and if it's true, you can go ahead and not worry that the refund is not being added back to income.