Qcd and federal not itemized isn't carrying correctly to North Carolina

[aebrells]

I have a large QCD and do not itemize on the federal.  However, North Carolina allows that QCD to be added to the charitable gifts for state itemizing and it pays us to do that.  However, TT is NOT giving me the option to itemize, not carrying over the pieces (house taxes and other charitable) and the only way I can get it in properly is to override on the state including the total itemized state deductions.  Does anyone know if it will let me efile?  Or if Intuit plans to fix this?

[SteamTrain · Accepted solution]

Wow...I thought you found some strange bug...but there  is a subtle NC rule on that.

NC Instructions for Line 11 of the D-400:

"If you are entitled to and claim the standard deduction on your federal income tax return, you MUST claim the N.C. standard deduction on your State return. If you itemized your deductions on your federal return, you may claim either the N.C. itemized deductions OR the N.C. standard deduction on your State return unless you are not entitled to the N.C. standard deduction. The N.C. itemized deductions are not identical to federal itemized deductions and are subject to certain limitations."

...that is on the top-rt of page 7 of the NC instructions:

http://www.dor.state.nc.us/downloads/D401.pdf

__________________________________________________________________

The TurboTax software follows that rule, 

......but what you can try to do is to go back to the Federal section and "continue" from the Deductions&Credits page, and on one of the interview pages, you can change your Federal return to "Itemized" deductions, even if smaller than the Fed Std Deduction (you are allowed to do so)....and continue from that and see what the NC balance due/Refund changes to.  Then decide which gives you the biggest total refund.  You have to [pay attention to both the Fed refund meter and the NC refund meter..

__________________________

I Created a single NC person, age 76 in 2016, with a 10,000 QCD, and 6,556 of other Federal deductions , such that the Fed is Std Deduction.  The NC D400, Schd S has no itemized deductions on it...as it shouldn't.

Fed Refund: $787. NC Balance Due: $360 = +$427

____________________________

I force-switched the Federal to "Itemized", and the The NC D400, Schd S now has itemized deductions on it.  (Prop Taxes $2,000, Charity+QCD 13,000, and $343 allowed Med expenses....for $15,343 total .  $1213 of NC state taxes paid is used in Fed but not allowed to be used for NC)

Fed Refund: $662....... NC refund: $48 = +$710

_________________________

So it works as intended, and forcing Federal Itemized Deductions, in my test case, works better overall...it may or may not for you depending on the gory details in your tax file.

[aebrells]

Sorry, I disagree.  I agree with the "rule" but since they also disallow the QCD subtraction for the income I think fairness means I'm entitled to itemize in this case.

[aebrells]

Also you misread my taxes, those weren't state income taxes but property taxes, which ARE allowed.  Thanks for the info.

[121marti]

I hope you were able to see this answer- here is the link.  
And it is much more detailed and agrees with my answer.  You need to switch to itemized on your federal return. Please copy the link below:

<a rel="nofollow" target="_blank" href="https://ttlc.intuit.com/replies/6018510">https://ttlc.intuit.com/replies/6018510</a>

[SteamTrain]

well..maybe I mis-read something you posted...but Prop taxes are a part of the total on line 16 of the Schd S...and that adds into line 23.  ( All I was saying was that ..of the $6556 of Fed Itemized deductions in my test return, 1,213 was state taxes paid...that's why my total NC Itemize Ded were only 15,343, and not 16,556)

Notice also that I indicated that my $2000 of Prop Taxes did show up on the Schd S when I switched Federal to Itemized Deductions?

BUT
.....none of lines 15-23 get filled out by the software (except for 20k on line 18) unless you use Itemized Deductions on the Federal tax return. ....they are unnecessary when NC has to use the Std Ded.

[SteamTrain]

I certainly agree with the "Fairness" about: IF adding back the QCD as NC income, it should be allowed as an itemized deduction...but that has nothing to do with NC tax rules

....I see absolutely no reason why NC should not simply allow the QCD to be used as the Feds use it....but that was the way that the NC Legislature changed the laws when the new party took control....talk to your state representatives.

You have the rules as defined by the NCDOR......defy them at your peril.

[aebrells]

I agree, and will file standard with NC.  I doubt they thought through exactly what would happen to the QCD if you were unlucky enough to take the standard federally with a QCD.  As it happens that it will actually cost us very little to comply, and let us efile.  Thanks for all your answers.

[jtalbert]

looked at instructions and see following:  North Carolina did not conform to the extension of the federal
provision which allowed an exclusion from gross income for a
qualified charitable distribution from an individual retirement plan by
a person who has attained age 70 1/2 under section 408(d)(8) of the
Code. Therefore, an addition to federal adjusted gross income is
required for the amount excluded from gross income on your federal
return. Note: You may deduct the contribution amount added to
federal adjusted gross income on Form D-400 Schedule S, Part C,
Line 20 if you itemized N.C. deductions.

[jtalbert]

looked at instructions and see following:  North Carolina did not conform to the extension of the federal
provision which allowed an exclusion from gross income for a
qualified charitable distribution from an individual retirement plan by
a person who has attained age 70 1/2 under section 408(d)(8) of the
Code. Therefore, an addition to federal adjusted gross income is
required for the amount excluded from gross income on your federal
return. Note: You may deduct the contribution amount added to
federal adjusted gross income on Form D-400 Schedule S, Part C,
Line 20 if you itemized N.C. deductions.

[121marti]

You will have to try and override. NC state "rules" that if you claim standard deduction on your federal return you MUST claim the NC state standard deduction on your state return.

[Taxboy58]

NC law changed for taxable years beginning on or after January 1, 2019 to adopt the federal income exclusion for QCDs.  See NC General Statute 105-153.5(a)(2)a.