itemized deduction this year, next year state refund is taxable only to certain extend

[shiyi11]

single filer

state taxes way over 10k cut off, so I can only deduct 10k

have mortgage bills, adding together about 15000, which is more than the standard $13,850 [great]

but next year my mortgage interest will be a lot, so I know for sure I will file itemized for 2024 tax year in 2025.

but right now I am debating whether this year i should start itemized.

i would get about 1k from state if itemized, about 100 dollars more if I take standard deduction.

it is my understanding that: state refund is only taxable to the extent that it’s more than the refund you would have received by choosing the larger refund from either Standard deduction or General sales tax.

so i will pay taxes on that extra 100 dollars in 2024 tax year in 2025, so I would pay 10 dollars back to the state.

so itemized still comes out ahead.

[Vanessa A]

Your state tax refund is taxable for the amount that is included as an itemized deduction on your federal return.  So, if you have $15,000 in state taxes withheld and you get $1,000 back, it would not be taxable.

However, if you have $8,000 in state taxes included in your itemized deductions and you get $1,000 back, you would have to include that $1,000 on your return for next year. 

Which state are you in?  In general, you do not get a deduction on your state return for taxes paid to the state, although all states have different rules.

[shiyi11]

CA state tax total is 17,000

so my 1000 refund is nontaxable next year if i understand it correctly

thanks!

[Vanessa A · Accepted solution]

That is correct.