Virginia taxpayers be careful about standard vs itemized deduction

[jojo52319]

While completing our federal and state tax returns for 2021, I came upon something that may be of interest to others who are also working on their taxes.

We used Turbotax Deluxe Federal and State for our taxes.  This year Turbotax recommended that we use the standard deduction for our federal tax return.  This was a surprise because we’ve always used the itemized deduction in the past.  Another surprise was the size of our state tax refund.  It was over $1000 less than 2020’s, even though withholding and income hadn’t changed significantly.

I redid our returns, this time forcing Turbotax to use itemized deductions instead.  The result was that our federal refund decreased by over $200, but our Virginia state refund increased by over $770.  The total federal plus state refund increased by more than $560.  If I had gone with Turbotax’s recommendation we would have paid more in taxes and gotten a much smaller overall refund.

I hope this information helps others save money on their taxes.  Unfortunately, you may have to choose between overpaying your state taxes or overpaying your federal taxes to get the best overall outcome.

[RaifH]

You are correct. Virginia, along with Georgia, Utah, Oklahoma, and Washington DC all require the taxpayer to itemize their federal deductions if they are going to itemize on their state return.

This can lead to a situation like the one you experienced where TurboTax suggests the standard deduction to maximize the federal return. However, your overall tax situation is improved if you itemize. This is most common in Virginia, Georgia, and Oklahoma where the standard deductions are much lower than the federal standard deduction. 

The moral of the story is if you're from one of those three states, once everything is entered, go back and switch to itemized deductions to see if it helps.

[jojo52319]

Thanks for the information.  Are those the only five states that require taxpayers to take the same deduction on federal and state returns?  I read somewhere that there are nine states that do so, but now I can't find that reference.  I found info on the Tax Foundation website that lists eight, adding Kansas, Maine and Oklahoma to the ones you listed.

It would be helpful if Turbotax would add a caveat somewhere that users should make sure they're using the right deduction, especially for the states you mentioned.

Thanks again.

[JulieS]

Here is a list of states that make you use the same option, standard or itemized deductions, as you use on your federal return:

• District of Columbia
• Georgia
• Idaho
• Kansas
• Maryland
• New Mexico
• Oklahoma
• Utah
• Virginia

In addition Nebraska only allows you to choose standard or itemized for the state, if you itemized your federal. 

[HOKIE1995]

Yes I just realized this last night and can't believe I found this discrepancy. I searched the web to see if anyone else noticed this and wham this thread appeared. I had to amend my 2022s which put  me just in itemize camp and saved like $1200 between fed and state. And this year saved like 600 on State vs using standard. Only my second year with TTax and not impressed I had to find this out on my own, it should offer more guidance.

[HOKIE1995]

Yes exactly, really shocked VA hurdle is so low at $16K.