Recovery Rebate Credit Worksheet changes my refund amount

[danielwroberson]

If we aren't supposed to be taxed on our stimulus checks, why does my state refund go down when I input my first stimulus payment in TurboTax Home Business 2020? On line 16 I enter 3,400 and my Oregon State refund drops. Nothing changes when I enter anything on line 19, regardless of how much I input. Any help with this would be greatly appreciated, as I think I am ready to file other than this. If I'm mistaken, please point me in the direction as to why this would affect my refund.

[DawnC · Accepted solution]

Some states use the stimulus payments when figuring certain deductions from taxable income.  Oregon is one state that does that.  

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 Line 10 of Form 40).  So, the reduction to taxable income is less which equates to a higher taxable Oregon income.  

[danielwroberson]

Thank you so much for the explanation, that makes total sense. Oregon is a little quirky in how it does things, especially without sales tax and I'm sure this is one of the ways they make up for it.

[harriska6]

Any hints as to where this worksheet exists? I'm searching all over to find how to put the $3600 (total for 2 adults) into 1040 line 30 directly and apparently turbo tax won't let me. I'm in Oregon and have to pay tax on it but for the life of me, I can't figure out HOW to put the number in there.

[DawnC]

To enter the stimulus payments that you received on your tax return, search for stimulus while inside of your federal return.  Use the Jump to stimulus link in the results to be taken to the questions.   You will enter the amount of the first payment and then the amount you received for the second payment.   If TurboTax determines that you did not receive the full amount you qualified for, the amount you were shorted will show up on Line 30 of Form 1040.   And TurboTax will automatically transfer that information to the Oregon return.  

If your AGI is over the limit for the credit, you won't get the questions and you don't have to enter anything about the payments on your federal return.  Also, if you received the exact amount you should have, there is no credit to be claimed.   Your recovery rebate is $0 in this case, and nothing needs to be entered on the Oregon return.  

You do not have to pay Oregon income tax on the stimulus payments, not directly anyway.   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 Line 10 of Form 40).  So, the reduction to taxable income is less which equates to a higher taxable Oregon income.  

@harriska6