I paid estimated local taxes in 2024 for 2024 (and payments for actual taxes due for 2023), what can I deduct on my state taxes for 2024?

[fiveten]

Turbo Tax seems to use an amount between the estimated taxes and the lower actual taxes for 2024 - is there a bug?). Note actual local taxes = (state income - deduction of local taxes) (because that is the line on state taxes it uses) x tax rate, sort of circular

[MonikaK1]

Yo didn't mention which state and local tax jurisdictions are involved, but in general, your estimated taxes are what you pay in during the tax year based on your prediction of your income and deductions for the year. Depending on what actually happened during the year, your estimated taxes may or may not have been enough to cover your tax liability.

You can deduct both city and state taxes on your federal return. Each local jurisdiction may have its own rules.

TurboTax calculations are guaranteed and are based on the actual federal and state tax rates and any special rates that apply, such as self-employment tax and capital gains tax.

To calculate estimated taxes and prepare Forms 1040-ES:

1. With your tax return open, search for 1040-es (be sure to include the dash) and select the Jump to link
2. Answer No to the question Do you want to change your W-4 withholdings for 2025?
3. Answer the questions about things like your 2025 filing status, income, and deductions
4. Eventually, you'll come to the Print Vouchers? screen. Answer Yes and we'll include your 2025 1040-ES payment vouchers when you print a copy of your return later

In addition, TurboTax's TaxCaster is available without opening your return and will estimate your total taxes for 2023.

You can also use the IRS Withholding Estimator to calculate amounts to be withheld from wages.

Please also see this TurboTax tips article for more information about estimated taxes.

[fiveten]

The state is Oregon.   My main question is what can I deduct in local taxes  on the state return.  I got the standard deduction on my Federal Return.  

In 2024 I. paid about 1,200 in local taxes in city and county taxes for 2023, and paid estimated taxes. of about 2,500 in estimated taxes for 2024 also in April of 2024.  If my actual local taxes are about 1,500 what can I use as a deduction on my state taxes?  Assuming I can deduct the taxes paid for 2023 of 1,200, it would be either 1,200 + 2,500 or 1,200 +1,500 (estimated taxes are more than actual so I could deduct all of the actual?

That is my main question and the most important one for this year.  

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If it is the estimated taxes, and I carry over the 1,000 I assume I don't need to do anything on my state taxes next year except for any additional payment I might make in estimated taxes.  If I don't carry it over, I guess it would be a negative amount against any additional tax payments I make?

If, instead it is actual taxes up to estimated taxes paid (which would be all of it this year) That would be simple, the carryover would be deductible next year if I carry it over?

Except the (actual) local tax for 2024 is based on Income for 2024 from the state tax form minus deductions, including the actual local taxes (if that is what is used). So I can't do the local until I subtract it from the state!

 local tax = local tax rate (2.5%) x (income - local tax ), or .975 x local tax = 2.5% income (before deduction of local tax for 2024 but after other deductions) so not quite as circular as I first thought still more complicated

than it should be.

Continue solving for actual local tax = .025/.975 * income after all deductions except the local ones)

Turbo tax gets 3003 but that isn't 1,200 + 1,500 or 1,200 +2,500??

These aren't my exact numbers.

[ThomasM125]

You will deduct the local taxes you paid during the year. The important thing is when you paid them, not what period they belong to. However, if you get a refund of local taxes in the current year from the prior year tax return, you will need to subtract that from the taxes paid in the current year to arrive at the local tax deduction.

It states this in the instructions to Schedule OR-A:

[fiveten]

Thanks so much, I could not even get Oregon phone line to answer this.  It does say taxes paid, but does not say when. or estimated or actual so it did not seem that clear to me, puts allot on the word "paid"?.  (I think some instruction did point out the difference but not sure where that is, Fed or State etc.)

I wonder if there is a way to game this by paying and taking a large deduction one year, and then a standard deduction the next, but probably not worth the trouble, or maybe the form separates this from the standard deduction.

So I will override what Turbo Tax is using, though that would be higher so a bit risker.  Turbo Tax doesn't show how it is getting its number. Will make sure nothing previously deducted somehow got refunded, should not be since I paid amounts in April and I carried over excess from 2023 to 2024, I think, but will take another look.

[DawnC]

From the Oregon 2024 Itemized Deductions instructions - You may deduct certain state or local income taxes or foreign income taxes you paid during the tax year, such as income taxes paid to a state other than Oregon, mandatory contributions to certain employment-related programs in other states, and taxes on real or personal property located in the United States that are based on the property’s value (known as ad valorem tax).  Income-based taxes paid to a local government within Oregon, such as Portland’s Arts Tax, may be deducted because they’re not paid to the State of Oregon.    See pages 2 and 3 of the instructions linked above.  

Line 5. State and local income taxes. Enter the total of the state and local income taxes you paid to a local government or to a state other than Oregon, reduced as explained above for any credits you’re claiming for income taxes paid to another state.  Note: If you deducted sales tax paid instead of income tax paid on your federal Schedule A, you must enter 0 on line 5.

[fiveten]

OK this is great information.

I think I figured out what Turbo Tax is using:

Local Taxes paid of 3,722

minus (OREGON!?) State tax refund of 684 which was prorated to years of 2,755 and used on Federal Sch. A line 5a (but standard deduction claimed) shown on State Refund worksheet.

 3,722 - 684 = 3,038

Not sure why this is used here, Oregon taxes are not a deduction on Oregon's return.

Guess I will use 3,038 for now, it is the lower number.

I was thinking most of this might have been a return of 668 in local taxes 1099G but that happen in 2023 for taxes paid in 2021!  It did not affect 2023 taxes (federal) but doesn't seem to have been applied in either year for state?

[PatriciaV]

The state tax refund was already included in the calculation of your tax liability on the related state income tax return. That refund would not be reported on the current year state return.

However, state tax refunds are reported on your federal return for the year you receive the refund because you received a deduction for that amount in a prior year.