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Level 1

Is it better to take a 2018 standard deduction (itemize would be over $1,800 married filling jointly)?. My 2018 State refund will be $1,100 will this trigger 2019 income?

As I have reviewed my 2017 tax return and the 2018 State and Local Income tax worksheet (second page Sec A) states if you use standard deduction the refund is non taxable. So will the same rules apply when doing your 2018 and 2019 tax returns.  In my case my estimated tax increases by $121 if i use standard deduction (MFJ) in 2018.  My concern I expect $1,100 refund from my State in 2018 and this would trigger reporting as income for my 2019 return.

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Level 20

Is it better to take a 2018 standard deduction (itemize would be over $1,800 married filling jointly)?. My 2018 State refund will be $1,100 will this trigger 2019 income?

Under the tax benefit rule, the state refund is only deductible up to the point where you get a tax benefit from deducting it.

Let me try and parse this out from your numbers.

If your federal tax is $121 higher when claiming the standard deduction, then your state tax deduction (the amount that state taxes raises your itemized deduction OVER the standard deduction is either $1008 (12% bracket) or $550 (22% bracket).  That means that, at most, $1008 or $550 of the state refund would be taxable, not the entire $1100.  As a result, if you itemize this year and save $121, you will end up paying back that same $121 next year.  Do you want to hold that $121 for a year or let the IRS hold it?

That's the simple case, and assumes that tax brackets won't change and that your income next year will be similar.   If your income is much higher next year (2019), then you could end up paying 22% when you only saved 12% this year, and come out slightly on the losing side.  Or if your income is much lower, you could end up pay 12% when you saved 22% this year, and come out slightly ahead.  

Ultimately its up to you. 

2 Replies
Level 20

Is it better to take a 2018 standard deduction (itemize would be over $1,800 married filling jointly)?. My 2018 State refund will be $1,100 will this trigger 2019 income?

That’s up to you.  I don’t know what the $1,800 is you are referring to.
Do you think you will have enough to itemize this year?  This year the Standard Deduction will be doubling so many people will be switching to the Standard Deduction.  And there is a max 10,000 limit (5,000 MFS) of property tax and state taxes "SALT".

FAQ on 2018 changes <a rel="nofollow" target="_blank" href="https://ttlc.intuit.com/questions/4482394-how-will-tax-reform-affect-my-2018-federal-tax-return">htt...>

For 2018 the standard deduction amounts are:
Single 12,000 + 1,600 for 65 and over or blind
HOH 18,000 + 1,600 for 65 and over or blind
Joint 24,000+ 1,300 for each 65 and over or blind
Married filing Separate 12,000 + 1,300 for 65 and over or blind

Level 20

Is it better to take a 2018 standard deduction (itemize would be over $1,800 married filling jointly)?. My 2018 State refund will be $1,100 will this trigger 2019 income?

Under the tax benefit rule, the state refund is only deductible up to the point where you get a tax benefit from deducting it.

Let me try and parse this out from your numbers.

If your federal tax is $121 higher when claiming the standard deduction, then your state tax deduction (the amount that state taxes raises your itemized deduction OVER the standard deduction is either $1008 (12% bracket) or $550 (22% bracket).  That means that, at most, $1008 or $550 of the state refund would be taxable, not the entire $1100.  As a result, if you itemize this year and save $121, you will end up paying back that same $121 next year.  Do you want to hold that $121 for a year or let the IRS hold it?

That's the simple case, and assumes that tax brackets won't change and that your income next year will be similar.   If your income is much higher next year (2019), then you could end up paying 22% when you only saved 12% this year, and come out slightly on the losing side.  Or if your income is much lower, you could end up pay 12% when you saved 22% this year, and come out slightly ahead.  

Ultimately its up to you.