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Happy Valley
Returning Member

Stimulus Checks reduced my state tax refund amount

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...

9 Replies
Hal_Al
Level 15

Stimulus Checks reduced my state tax refund amount

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
Returning Member

Stimulus Checks reduced my state tax refund amount

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
Level 15

Stimulus Checks reduced my state tax refund amount

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

Happy Valley
Returning Member

Stimulus Checks reduced my state tax refund amount

Oregon

SteamTrain
Level 15

Stimulus Checks reduced my state tax refund amount

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.

_______________________________________

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

 

*Answers are correct to the best of my knowledge when posted, but should not be considered to be legal or official tax advice.*
KDoming19
New Member

Stimulus Checks reduced my state tax refund amount

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
Expert Alumni

Stimulus Checks reduced my state tax refund amount

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

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ghazarian2000
New Member

Stimulus Checks reduced my state tax refund amount

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
Expert Alumni

Stimulus Checks reduced my state tax refund amount

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.  

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