topic Taxable refund of Hawaii state income tax in State tax filing

Taxable refund of Hawaii state income tax

Kathy M — Tue, 30 Mar 2021 23:52:47 GMT

I received a Hawaii state refund in 2020 for my 2019 taxes. I itemized in 2019 and took the deduction for state general sales tax. When I prepared my 2020 return TT did not include the refund in my AGI. When I prepared my Hawaii 2020 return TT added the refund back into my Federal AGI. TT even stated "congratulations, your refund is not taxable" but it was still included. Anyone have this problem or know why this happened?

Re: Taxable refund of Hawaii state income tax

AmyC — Wed, 31 Mar 2021 01:54:15 GMT

Yes. On the federal, you did not use the state tax paid deduction so your refund was not taxable.

On the state, HI has a state tax refund worksheet. It begins with your refund from last year. You could have ended up paying tax on the full amount. The worksheet should be in your return. It is the first worksheet in Instructions for Form N-11 Rev 2020 - Hawaii.gov. See page 33 for the worksheet.

Re: Taxable refund of Hawaii state income tax

Kathy M — Mon, 05 Apr 2021 02:51:11 GMT

In the line by line instructions foe Hawaii Form N-11 page 12, 3rd column, it states

Note: None of your refund is taxable if, in the year you paid the tax, you either (a) did not itemize deductions,

(b) elected to deduct state and local general sales taxes instead of state and local income taxes, or (c) did not deduct state and local income taxes because your federal adjusted gross income was above certain threshold amounts.

Also no where on the State Tax Refund Worksheet does it even ask if you elected to deduct state and local general sales tax instead of state income taxes.

Can you shed any light on this?