Recently married, spouse has a 1099-G for State Tax Refund

[larrybradshaw]

In 2023 filings both me and my spouse filed single. We were married in 2024 and are now preparing our first return - married filing jointly. My spouse received a 1099-G from another state for his previous employer withholding state tax. He itemized on his taxes last year, so did I. When I tried to enter the 1099-G it didn't ask for which of us it is for and then tried to use my 2023 income when displaying on the screen without the ability to edit or select it was from my spouse and not from mine. How do we care for this? 

[KrisD15]

Whether a state tax refund is reported and tax on the following year(2024) tax federal return is based on whether that same taxpayer itemized deductions on the previous tax year (2023) federal return.

If the taxpayer itemized deductions, the calculation is basically this- If the taxpayer had claimed less state tax (the refund amount less) would the federal return have changed?

TurboTax has an interview to use when determining the taxability of the refund. When asked, use the numbers only for the taxpayer that received the refund. It will ask for total state withholding and payments, that should be only HIS state tax withholding and payments. If you used your account, TurboTax will pull over your 2023 files. 

If he used TurboTax last year, you could use that account to determine if the refund is taxable, since that account will carry-over his tax file.

You can also figure it yourself by decreasing the state tax claimed on a MOCK 2023 return (for him for 2023) and see if the refund/tax due changes. (If he used TurboTax for 2023, open 2023 buy selecting "Add a state" and make the change, be sure to "undo" the change when you're done.)

The amount the refund/tax due changes would be what you would need to claim. 

If the state tax was limited by SALT, you'd need to keep that in mind as well. For example, if he paid 12,000 in property tax in 2023, but was limited by the SALT limit of 10,000, then any refund 2,000 or less would not be reported. 

If the state refund is insignificant, and you prefer not to bother with the calculations, you can always elect to claim it "just in case" it is taxable. 

If you go through calculations on your own and find that only a portion is taxable, enter the 1099-G with only that portion amount in Box 2, and then tell TurboTax to claim it all.

If you go through calculations on your own and find that none of the refund is taxable, don't enter the 1099-G. (delete it) 

Keep it with your tax file along with your calculations.