Refundable tax credit received in cash for 2017 NY State taxes. We did not pay any NY income tax in 2017. SB taxable as income for Fed, how to enter into software?

[KrisD]

Was it a refund of a tax you paid in 2016 or 2017?  What sort of tax? A refund of your 2016 state income tax?

[buzzpaultax]

It was a refund for long term care cost assessment paid by us into NY State.  We did not owe any income tax for 2016 or 2017 so the credit was refunded to us in cash.

[KrisD]

Did you itemize and claim those payments as deductible medical expenses on a previous return?

[buzzpaultax]

Yes, out of pocket medical costs for long term care which includes assessment taken as itemized deduction in 2016.

[KrisD]

Yes, report it as income. Please see answer.

[KrisD · Accepted solution]

Since you did use the expense as a deduction last year, you do need to report it as income this year. You can look at IRS Pub 502 and IRS Pub 525 for more detail, but basically the refund is reported in full as income UNLESS the refund amount causes what you did claim as itemized deduction to be less than the standard last year. For example, say you itemized 7,000 last year and got a refund of 1,000 of the medical premiums paid this year. Now the adjustment for the refund means you could have only itemized 6,000 BUT the standard deduction was 6,350, so you only (in this situation) report 650 as taxable income. 

Report the income on line 21 and describe it as "refund of long term health premiums" (you may need to shorten it)

• Sign into your account and start your return
• Click Federal on the left side-bar
• Click Wages & Income on the top
• Scroll down to Less Common Income and click Show more
• Scroll down to Miscellaneous Income, 1099-A, 1099-C and click Start
• Scroll down to Other reportable income and click Start
• “Any Other Taxable Income?” screen click Yes
  “Other Taxable Income” screen type   "Medical premium refund"   into the Description box

Enter the amount into the Amount box and click Continue

https://www.irs.gov/publications/p502

https://www.irs.gov/publications/p525    page 23-25