Form 8960, S&L deduction

Forum|Forum|2 years ago
March 5, 2024
1 reply
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I believe that I am entitled to a S&L deduction on form 8960, Part II line 9b. That line is currently left blank by TurboTax. How/where do I input the appropriate information so that an expense is reflected. Thanks.

AmyC

Level 15

Correct, Form 8960 contains state and local taxes on line 9b. It is carried there from the worksheet. The program pulls the numbers and populates them. Perhaps you have a limitation? Can you clarify where you paid the tax, what forms show it, any other information to help you?

About Form 8960, Net Investment Income Tax Individuals, Estates, and Trusts states: Line 9b—State, Local, and Foreign Income Tax

Include state, local, and foreign income taxes you paid for the tax year that are attributable to net investment income. Form 1040-NR filers include only taxes paid for the U.S. residency period of the tax year. Sales taxes aren’t deductible in computing net investment income. You may not take a deduction for any foreign income taxes paid for the tax year if you took a credit for any portion of them. See section 275(a)(4).

You can determine the portion of your state, local, and foreign income taxes allocable to net investment income using any reasonable method. See Reasonable method allocations, earlier, and Deductions subject to AGI limitations under section 67 or section 68, later.

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paradisojAuthor

Level 2

No numbers are pulling onto the worksheet. I have S&L taxes being withheld from payroll.They were inputted with the W-2 info and are reflected as payments on the NYS return. The investment income is recorded in the dividend, interest and capital gain sections. They are properly reflected on form 8960 and are resulting in the tax however they are not reflected in the worksheet for the S&L deduction.
for limitations, S&L taxes were limited to 10,000. Actual amount of tax withheld was in excess of 10,000. Also the standard deduction is being taken.
What would you suggest as next steps?

thanks

IsabellaG

Level 13

NJ. But I think I found the answer to my problem. I did not itemize my deductions.; when I faked an expense to allow me to itemize, the state tax carried over. Also did some research and the consensus is that you cannot deduct state tax on line 9b if you do not itemize.

You are correct that if you do not itemize deductions, you cannot deduct the state tax allocable to investment income.

See the instructions for Form 8960, under Part II—Investment Expenses Allocable to Investment Income and Modifications. State, local, and foreign income taxes are deductible if properly deducted on your return when calculating your U.S. regular income tax.

If you don't claim a deduction for these taxes by itemizing, you can't claim them on line 9b of Form 8960.

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