Why as a self employed filer am i getting a federal refund but I owe state?

[HelenC12]

If you're getting a federal refund but you owe state income tax, that means the federal government has more credits and deductions that you're eligible for than your state government.

Your state may even add back credits and deductions that the federal government allowed you. One example is the treatment of depreciation. Some states don't allow accelerated depreciation, which the federal government may.

Also, states have different income tax rates than the federal government. Your federal return income may be reduced by your credits and deductions therefore the income tax you pay is low or you may even get more money back versus what you paid. On the flip side, your state return may add back some of the federal deductions causing your income to be higher and the higher the income, the more taxes you pay.

• Do a line by line comparison between your 2020 tax return and your 2019 tax return to see the differences from one year to the next.