2025 Oklahoma Itemized Deductions re SALT

[Reserved_Parking_01]

I am working on my 2025 individual Oklahoma state tax return and see that Turbotax is limiting the addback of my federal state income tax deduction on Schedule 511-D based on the $10,000 SALT cap that was in place last year.  The OBBBA raised the SALT cap to $40,000 for 2025 (in my case), so I am not limited on my federal SALT deduction this year.  As such, I would expect that the addback on Schedule 511-D would be my actual federal SALT deduction and not be limited by this $10,000 cap for state purposes.  Is this an error in Turbotax or did Oklahoma decouple from the OBBBA in this regard?  I'm using the desktop 2025 Turbotax Home and Business version on Windows, if that helps.

[AmyC]

OK has a cap of $17,000 and my software is showing the correct cap. The schedule A from federal for charity and medical is not capped like the SALT.

See OK tax commission itemized deductions.

Please review your figures and the rules to see if you do have a problem and let us know what the issue is for us to help.

[Reserved_Parking_01]

Thank you for taking the time to respond!  I agree that Oklahoma has a $17,000 cap on itemized deductions.  However, that is not the issue here.  The issue I have is with OK Schedule 511-D Line 2 related to the addback of state and local income taxes.  Turbotax is reporting a limited addback based on the prior year $10,000 SALT cap that was in place on the federal return (which has since been raised to $40,000 under the OBBBA for 2025).  To illustrate, I put in that I had $10,000 of state income tax and $5,000 of real estate tax on Schedule A, for a total deduction of $15,000 (note that I am not limited this year as I would have been in the prior year under the $10,000 cap). 

For the Oklahoma return on Schedule 511-D Line 2, I need to add back state income taxes deducted on the federal return.  Instead of adding back the full $10,000 that I was able to claim on the federal return, Turbotax is adding back $6,667 (which represents the pro rata state income tax that would have been deducted had I been capped under the $10,000 limit) (e.g. $10,000 state income tax / $15,000 total tax deduction times $10,000 limit).   Unless I am mistaken and Oklahoma is still applying the prior year SALT cap, then it seems that this is a calculation error on Turbotax's part and Turbotax is overstating Oklahoma itemized deductions.

[rolanddawson2500]

I am also having this problem. I is is clearly still using the $10,000 cap, and prorating the 2025 state income tax reduction (the ratio of $10,000 divided by the Schedule A Line 7  times line 7). Turbo Tax, please advise when the fix will be available, or can I hard wire the correct number (my 2025 SIT witholding) in as long as it is less than $40K? I am ready to file exept for this error, which I believe to be a coding error?????????????

[rolanddawson2500]

PS, just for clarity, I am clearly not in a posistion to worry about the $17K cap, my issue is geting the tax program to correctly calcuate the number. As long as your property and SIT are below $40,000 you should calulate the reduction in your itemized as your 2025 OK state witholding with no proration in Line 511-D Line 2?

[rolanddawson2500]

This is a seperate issue from the $17K cap. In OK, you have to go either/or, this is for itemization with a cap. If you are under the cap ($17K) then the other form (Property Tax + SIT ) kicks in. The 2025 TT program is apparently  still using $10K for the cap on the proration of SIT if you go down the under $17K with itemization after taking out the Medical Expense. They are trying (apparently) to limit charitable contributions. My return is in the later catagory, and the TT program is prorating the 2025 SIT against the old $10K SALT cap, not the higher SALT cap of $40K. This results in a significanly lower SIT allowance (which raises my actual 2025 SIT) I am above last years $10K cap, but  under the alternate calculation's $17K cap. If I use the actual 2025 SIT witholding (not the one you calculate in the program), it makes a $124 dollar difference in my actual Oklahoma SIT taxes, and will ultimaltely require a amended return. This appears to me to be a programing error, as noted above in the original post? Please advise.

[Reserved_Parking_01]

Thanks for sharing, @rolanddawson2500 !  Glad to see your response and that I was not the only one who thought that there might be an issue here.  I thought that there might be a chance that the issue could be related to state conformity of the IRC, which could mean that Oklahoma may not follow yet the new changes in the OBBBA.  However, upon further research, this is not the case because 1) Oklahoma has a rolling conformity with the IRC so is technically following the amendments made by the OBBBA, but more importantly, 2) the state statute has not changed, which states that "for tax year 2016 and subsequent years, taxpayers shall add back state and local sales or income taxes which were allowed as an itemized deduction on the federal income tax return" [Oklahoma Admin. Code 710:50-15-50(i)(1)].  

As such, since the $10,000 state and local tax cap is not applicable on the 2025 federal return, this cap should not be extended to the Oklahoma state return, and the full state income tax deducted on federal Schedule A should be added back if the deduction is not limited on the federal return.  As of today, my software has been updated to the latest version, but this error has not been corrected.  Oklahoma tax returns filed through Turbotax before today do face state audit risk since taxable income is understated for those affected by this calculation error.  I would like to hear from the Turbotax team to see if we are correct in determining that an outdated programming bug does exist and if the issue is currently being addressed by the development team.

[haleyrsd]

Two weeks ago, a few filers from Idaho reported a similar issue for Idaho state taxes (https://ttlc.intuit.com/community/taxes/discussion/salt-deduction-error/00/3745484). The published formula for the add-back for SALT to the Idaho tax forms is clear and should result in correctly adding back all the federally reported SALT back in as income for the state, but Turbo Tax is not following the formula.  Two weeks ago we provided our specific data for TurboTax to investigate and correct this simple mistake, but we have not had any responses from TurboTax since then. It's frustrating TurboTax lists these state forms as finalized, but these calculation errors persist. Because of TurboTax's lack of transparency, I suspect most people will likely file not realizing there is an error that could lead to significant underpayment of state taxes.

[rolanddawson2500]

I just hung up from TurboTax product support. Their answer was to get me to switch to their Expert Service. This is a calculation error, not a tax application question. Anyway, I know what the correct answer is, so my options are: 1) File with the TT calculations, which are probably wrong, or 2) Override their calculation and risk having electronic filing rejected. They warranty accuracy of calculations, but this sounds like it could be a mess. What are Oklahoma filers thinking? I am ready to file, just don’t know which path to follow. Any thoughts?

[Reserved_Parking_01]

Thanks for providing that additional Information about Idaho, @haleyrsd! It is a little disconcerting for these issues to be around still, and that tax returns being able to be filed.  The calculation error is a simple matter that is easily fixable, but more concerning is that it is easily auditable by the state revenue agency.  It just takes an agent one look at the state income tax addback being reported, and one look at the Federal Schedule A to see the discrepancy and issue a notice of adjustment for additional taxes owed plus penalties and interest.

@rolanddawson2500, I definitely understand the hesitation and anxiety with e-filing a tax return through software in which we have to override the calculations and input a manual entry, especially if we cannot easily see the XML file that shows all the numbers that are actually being transmitted to the tax authorities.  As an Oklahoma filer myself, in this situation, I may utilize the Oklahoma Taxpayer Access Point website (https://oktap.tax.ok.gov/) and see if I qualify to e-file my state tax return directly with the Oklahoma Tax Commission.  This is a more manual process than using the Turbotax software but using the state tax portal will allow me to hold myself accountable for the tax figures I am reporting and gives me comfort knowing that I know exactly what numbers the state is receiving.  Using the OK TAP website is also free, so that is a bonus 🙂 

However, I would still like to hear how Turbotax is addressing this issue, whether that the issue is being looked at (or not) or address/acknowledge the audit risk related to this issue, either for those returns already filed or returns that will be filed through Turbotax before a fix is released.