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Level 1
February 11, 2023
Solved

Why does turbo tax use my state withholdings as my state income tax deduction on my federal return?

  • February 11, 2023
  • 1 reply
  • 21 views
I expected the state income tax deduction on my federal return to have been the actual state income taxes. But the program uses my payroll withholdings and no the actual state tax liability.
Best answer by MaryK4

Because your state income tax deduction is not determined until you file your federal tax return first, using the state withholding is a way for the IRS to have an amount already reported by employers on the current year W2 filing instead of having to go back and check the state returns the following year.  This is also why if you itemize and deduct state income tax, if you get a refund, you will get a 1099-G the following year which is added back as income to correct the deduction amount.  

1 reply

MaryK4
MaryK4Answer
Level 15
February 11, 2023

Because your state income tax deduction is not determined until you file your federal tax return first, using the state withholding is a way for the IRS to have an amount already reported by employers on the current year W2 filing instead of having to go back and check the state returns the following year.  This is also why if you itemize and deduct state income tax, if you get a refund, you will get a 1099-G the following year which is added back as income to correct the deduction amount.  

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