Turbotax incorrectly includes state income tax refunds as income when refunded the following year. Not correct if no tax benefit when paid, e.g. if stand. ded. taken?

[jancting]

See Tax Benefit Rule.  Refund is not income if no benefit was obtained when tax was paid, e.g. if stand. ded. taken, not itemized deducts.  Right?

[SweetieJean]

TT handles this correctly, assuming you transferred your 2019 info into the 2020 program.  Otherwise, TT asks if you took the Standard deduction for 2019.

Are State Tax Refunds Taxable? | The TurboTax Blog (intuit.com)

[jancting]

Thanks!  Yes, I agree that TT takes us to the right result.  I just found it confusing when the initial entry seemed to assume a state income tax refund would be taxable.  I had a similar concern when TT allowed me to complete my return without asking if I had made estimated tax payments, which I had.  Not a biggie to circle back and enter the tax payments, but a moment of concern when realizing something is wrong.  Good result in the end, and TT did indeed identify applicable tax benefits of which I was unaware!  (Recovery relief tax credit!)  So thanks, TT and SweetieJean!