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Need help understanding how Turbo Tax calculates the value for Line 14 on Utah form TC-40. Description in Help Center does not yield the result shown on my form.

 
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12 Replies
BillM223
Expert Alumni

Need help understanding how Turbo Tax calculates the value for Line 14 on Utah form TC-40. Description in Help Center does not yield the result shown on my form.

Line 14 on the TC-40 comes from Line 5a on Schedule A on the federal return. However, per the Utah instructions, if the amount on line 5a is sales taxes, then they are not carried over to Utah.

 

"Line 14. State Income Tax Deducted on 2019 Federal Schedule A If you did not itemize your deductions on federal form 1040 Schedule A, leave this line blank. If you claimed any state and local income tax paid as an itemized deduction on federal form 1040, Schedule A, line 5a, enter that amount on line 14. Do not enter any sales tax from Schedule A, line 5a." Please see the TC-40 instructions here.

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Need help understanding how Turbo Tax calculates the value for Line 14 on Utah form TC-40. Description in Help Center does not yield the result shown on my form.

Thanks, but that is not the issue, the taxes on my Schedule A L 5A are State income tax, not Sales tax.  Also, I read TC-40 instructions, but my read is the instructions imply TT should report all of my state taxes without accounting for the $10K limit (which doesn't seem right, but...).

The Help Center page describes apportioning the amount based on the percentage of the total due to the State tax.  After posting my question, I found out it appears the program simply subtracts my Real Estate tax amount from the $10K deductable total, and then assigns the rest as my State Income tax deduction (i.e., what goes on TC-40 Line 14).  That resulting, amount shown by TT on Line 14, is not the same as apportioning it like the example in the Help Center (i.e., by percentage).  I think the Help Center page isn't accurately reporting what the software appears to be doing.  In my case, I don't think it changes the outcome as I don't qualify for state credits.  Just not sure what the real rule is for accurately reporting the right amount on TC-40 (is apportioning allowed?), and on what rationale Turbo Tax is basing it's calculation (doesn't appear to be proportional, just simple subtraction).

Thanks,

AmyC
Expert Alumni

Need help understanding how Turbo Tax calculates the value for Line 14 on Utah form TC-40. Description in Help Center does not yield the result shown on my form.

The Utah directions, page 8, top right, says:

If you claimed any state and local income tax paid as an itemized deduction on federal form 1040, Schedule A, line 5a, enter that amount on line 14.

I went into my program and was able to trace my Utah line 14 directly matching with Federal schedule A line 5a - which is state tax withheld in my return.

 

If your computer is having an issue, we can do some troubleshooting.

 

 

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Need help understanding how Turbo Tax calculates the value for Line 14 on Utah form TC-40. Description in Help Center does not yield the result shown on my form.

I really don’t think it’s my computer.  Was your state tax deduction over the $10,000 federal limit?  Did you also have Property tax included on Schedule A as part of that total?  If so, did you look at what Help Center in Turbo Tax says it does to apportion the state tax amount on Line 14?   If so, did you get that number?   I don’t.  It does a different calculation (simple subtraction).

 According to the software help guide, it’s supposed to apportion the amount by the same percentage as the state income tax is in the total, non-limited amount.  Not just simply match the Line 5a number.   If you’re interested enough, try this in the software and let me know what you get:

 

St Income Tax (5a):  $15,000

Real estate Tax:   $3000

Total will show $18,000, before the $10K limit 

 

According to the description in Help Center, I think the apportioned amount that shows up on TC-40 Line 14 should be:  $8333

(i.e., $15,000 is 83.33% of $18,000, so the apportioned amount of the deduction due to St income tax is $8333)

 

However, if it gives you $7000 on TC-40, it’s behaving the same way as on my computer (i.e., $10,000 - $3000 = $7,000). 

I can see a rationale for either method, the SW does not seem to behave as described. Also, on what bases is either the apportioned number or the simple subtraction based in either a Federal or State instruction?

BillM223
Expert Alumni

Need help understanding how Turbo Tax calculates the value for Line 14 on Utah form TC-40. Description in Help Center does not yield the result shown on my form.

@CAD_13

 

Could you share the link to the post in the Help Center (which is actually just this Community)?

 

The Utah instructions do not mention any apportionment, and that is what we program to.

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Need help understanding how Turbo Tax calculates the value for Line 14 on Utah form TC-40. Description in Help Center does not yield the result shown on my form.

See below.  There is no link (it's not from the Community).  This comes from the On-Demand Tax Guidance in Turbo Tax, accessed by right-clicking on TC-40 Line 14 in Forms view in Turbo Tax itself.  I probably confused you by referring to Help Center.  Sorry about that.   I included the text below the screen shot in case it's too hard to read:

 

Turbo Tax Screen Shot.jpg

 

--------------------------------------------------------------

State Income Tax Deducted (Line 14)
CAUTION: This amount flows from federal Schedule A, line 5a. All state income taxes deducted on the federal return are added back to arrive at the Utah taxable income.

Due to the Tax Cuts and Jobs Act limitation on your federal state tax deduction, the amount added back for the Utah taxable income may be apportioned based on other taxes you paid like real estate or personal property.

When itemizing deductions and filing status is other than Married Filing Separate, the limitation on the federal state tax deduction is $10,000. The limitation is $5,000 for filing status Married Filing Separate. The amount added back to arrive at Utah taxable income is apportioned if the total state and local taxes (line 5d on the federal Schedule A) is more than the limitation for the filing status.

Example: A single filer itemizes deductions on their federal Schedule A with the following amounts:

- $10,000 state and local income taxes (line 5a),
- $ 5,000 state and local real estate taxes (line 5b),
- $ 5,000 state and local personal property taxes (line 5c),
- $20,000 total (line 5d),
- $10,000 deduction amount limited (line 5e)

The line 5a amount is 50% of the total line 5d amount. The apportionment method is used resulting in $5,000 added back to the Utah taxable income.

------------------------------------------------------------

AmyC
Expert Alumni

Need help understanding how Turbo Tax calculates the value for Line 14 on Utah form TC-40. Description in Help Center does not yield the result shown on my form.

Is it subtracting the full $10,000 as a deduction to add back the $5,000 or is it only deducting $5,000 and adding back $5,000 or is it doing something else? Since we can't see your tax return figures. Thanks for the picture!

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Need help understanding how Turbo Tax calculates the value for Line 14 on Utah form TC-40. Description in Help Center does not yield the result shown on my form.

If you follow my example calculation in the post above, it will tell you what it's doing.  In short, the amount it transfers to line 14 in the Utah form is $10,000 - Ut State Real Estate Tax (Line 5b on Schedule A), and calls that my UT state income tax deduction.  It doesn't apportion anything as described in the help file.

 

So, in my example above of $3000 in Property Tax, Turbo Tax reports $7,000 as my State Income Tax deduction on Line 14.  That is, simple subtraction ($10K -$3K = $7K), not an apportioned amount.  

 

In my personal case, it under-reports my deduction if the apportionment method were to be valid (not sure it is, but the Help file says that's what the SW is supposed to do.  Also, no idea if the simple subtraction method is valid, but both seem reasonable given the Federal limit of $10K.... just not sure what in the tax code Turbo Tax is using to justify either the method described or the method apparently implemented).  Ultimately, for me, it has no effect on my return as the only thing it impacts is calculating the state tax credit, which I don't qualify for anyway.  However, it does seem like an anomaly in the software..

 

I just ran another test case where I changed the property tax value to be $4,000 on Schedule A, and Line 14 on TC-40 now shows $6000 as my deduction.   Turbo Tax is not behaving as described in it's own Help file.   It's a pretty easy test to configure.

eeide
New Member

Need help understanding how Turbo Tax calculates the value for Line 14 on Utah form TC-40. Description in Help Center does not yield the result shown on my form.

Today I ran across the same issue. I see the same behavior that CAD_13 reported.

Need help understanding how Turbo Tax calculates the value for Line 14 on Utah form TC-40. Description in Help Center does not yield the result shown on my form.

Today I also ran across the same issue for my 2021 tax returns. I see the same behavior reported by CAD_13. Any explanations?

BillM223
Expert Alumni

Need help understanding how Turbo Tax calculates the value for Line 14 on Utah form TC-40. Description in Help Center does not yield the result shown on my form.

Please Ignore the On Demand Tax Guidance. The software is clearly not working that way. On the other hand, the software appears to be working correctly.

 

Take line 5b and 5c from Schedule A and add them together. Subtract this sum from 10,000. Take the lesser of 5a or 10,000 minus the sum of 5b and 5c. In other words, we want that portion if the state income tax (paid, like on your withholding) that when added to 5b and 5c brings the total up to 10,000, and if it brings the total to over 10,000, then we calculate how much of the state income tax is needed to bring 5b and 5c to 10,000.

 

All that apportionment language may date from years ago when the instructions for line 14 were considerably different. We will look into it.

 

 

@JTUtah

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Need help understanding how Turbo Tax calculates the value for Line 14 on Utah form TC-40. Description in Help Center does not yield the result shown on my form.

I would agree with CAD_13 in his review of the software .  I don't believe the calculations are correct.  As others more recently have noticed the same thing, I would love to hear about your review.    

 

As far as I read the instructions for the TC-40 Utah return, real estate taxes have nothing to do with the State income or sales taxes.  The number to carry into the State tax return should be from Schedule A line 5a, not $10,000-line 5b.  

 

I have for years created my own spreadsheet by reading the tax instructions.   I have only purchased Turbo Tax for the past 2 years because it was getting time consuming, when new income sources made it more detailed,  but I still find my spreadsheet  to be a great tool to double check my work against Turbo Tax.   In this specific instance, I believe TT is not functioning correctly. 

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