PTET refund

[Random Guy 1]

In 2023, I had state taxes paid on my behalf via a pass-through entity tax (PTET). In 2024, I received a refund of some of these taxes. The taxes definitely reduced my federal tax in 2023, and I'm sure I should pay federal tax on the refunds in 2024 (tax benefit rule). The TurboTax state tax refund worksheet doesn't seem to know how to deal with these. It only uses my 2023 itemized deductions for taxes paid. The PTET wasn't itemized; it just came out of the gross income reported to me.

Does anyone know how to handle this in TurboTax?

[rjs · Accepted solution]

If you did not claim an itemized deduction for the state tax on your 2023 tax return, then you do not report it as a state income tax refund on your 2024 federal tax return, and you do not use the state income tax refund worksheet. The entire refund is taxable income in 2024. Just enter it as "other income" on Schedule 1 line 8z of your 2024 federal tax return with a description that you enter. Here's how to enter it in the desktop TurboTax software.

• Go to Federal Taxes > Wages & Income.
• On the screen "Your 2024 Income Summary," scroll all the way down to the last section, "Less Common Income." Click the Start or Update button for the last topic, "Miscellaneous Income, 1099-A, 1099-C."
• On the next screen, "Let's Work on Any Miscellaneous Income," scroll down and click the Start or Update button for the last topic, "Other reportable income."
• The next screen asks, "Any Other Taxable Income?" Click Yes.
• On the next screen, "Other Taxable Income," enter a short description such as "PTET refund" and enter the amount. Click Continue.
• On the next screen click Done.

[Random Guy 1]

Thank you!