Stimulus Checks reduced my state tax refund amount

[Happy Valley]

Hi,

I just started to prepare our income tax for Federal and State (Oregon).  Turbotax asked us to enter 2 of the stimulus checks amount (1st-$2400, 2nd-$1200), however our state tax return refund amount reduced after we entered the numbers.  The stimulus checks are non-taxable for both of Federal and State, right?  I'm confused...

[Hal_Al]

But, don't go by that "refund meter" at the top of the page. Sometimes it's not accurate until additional info is entered. Wait til you get to the end, to see if you agree with the final result. Then all your info will have been input to analyze the result

[Happy Valley]

I did everything to the end.  I typed all the info.  Then, I went back to the Federal (stimulus check info page). If I removed the numbers ($2400, $1200), my state tax income refund increased.  Again, entered the stimulus check numbers, my state tax income refund decreased.  That means Turbotax considered the stimulus checks as taxable income.  Am I wrong?

[Hal_Al]

It doesn't make sense.  But, it's early and could be a glitch.  Which state?

[Happy Valley]

Oregon

[SteamTrain]

OK...figured it out.

Oregon allows an OR income deduction for the Federal tax liability.   Certain Federal tax credits are either allowed, or are not allowed to be used to adjust that Federal tax liability total that is eventually used to reduce OR taxable income.

From what I gather (if I see & interpret it right), Oregon does use the Federal stimulus payment you get, as reducing the Federal tax liability...thus a smaller OR income deduction (and more OR tax) when you enter the stimulus payments in the Federal section.

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The calculations that TTX "supposedly" uses are on pages 65 and 66 of the OR instructions...a series of calculations under "Federal tax worksheet" in the rt-column on page 65 and continuing to page 66.  Step #8 in that series of calculations uses your stimulus payment to reduce the eventual (adjusted) Federal tax liability that OR allows you to deduct from OR income  :

https://www.oregon.gov/dor/forms/FormsPubs/publication-or-17_101-431_2020.pdf

[KDoming19]

I am having the same issue.  There has to be a way for the state to not be taxing it, or adding it back.  

[DawnC]

The state of Oregon does not tax the stimulus payments or rebate credits directly.  Oregon reduces your taxable income by your federal tax liability.   But they make adjustments to that reduction.  Your stimulus payment(s) and the recovery rebate (if you did not receive your full payments) are subtractions to your federal tax liability number on your Oregon state return.  So, the reduction to taxable income is less which equates to a higher taxable Oregon income.   @KDoming19

[ghazarian2000]

I am trying to file our 2020 taxes using Turbo tax.  It is deducing the $3400 and the $2400, stimulus amount from our fed tax refund that is due to us.  We live in Arizona.  From what I learned, the stimulus checks are not taxable.  What am I doing wrong?

Is this related to income level?

[AlanT222]

You are not doing anything wrong.  The stimulus payments are not taxable.  

The stimulus payments you received last year and early this year were advanced payments on the 2020 Recovery Rebate Credit.  TurboTax automatically gives you the Recovery Rebate Credit when you put in your information and your dependents' information.

Once you tell TurboTax the amount you received in stimulus payments, TurboTax reduces the Recovery Rebate Credit. 

The credit should be reduced to zero if you received the proper stimulus payments.  

It will never be reduced below zero.  

You are not entitled to both the stimulus payments and the Recovery Rebate Credit.  

[jshr]

The same thing happened to us too only our state is Maryland.  When I put in the stimulus amount in answer to the Federal question of amount received, it immediately deducted the $1400 from the State refund and never did putit back into the proper amount.  Why?  How can we file for a correction to get it back from Maryland?

[jshr]

We were told told that State does not tax the stimulus checks but the amount was not added back into what was the refund before typing in the stimulus amounts?  Anybody know how to get it back ?

[AliciaP1]

TurboTax does not automatically populate the amount you received for the 3rd stimulus payment - as you noticed when you needed to input the amount.  Instead, it assumes your payment amount is $0 (since the box is empty until you populate it) and estimates the full amount included in your refund.  When you complete the box with the amount you already received, it is merely removing that amount from your refund to properly reflect that you already received.  It is not calculating it as taxable.

@jshr