State Tax Refund

[dfpowers]

I got a state tax refund for 2021.  Started doing my taxes for 2022.  I itemized my deductions last year.  However, I used the sales tax deduction in lieu of state income taxes withheld.  Program says my refund is taxable.  I disagree.  Believe there should be an option for using sales taxes that would make the refund non taxable.

[xmasbaby0]

If you itemized deductions on your federal return last year and received a state refund, that state refund is taxable for 2022.   

https://ttlc.intuit.com/turbotax-support/en-us/help-article/tax-refund/need-report-state-local-refun...

[xmasbaby0]

Edited to include more information

https://ttlc.intuit.com/turbotax-support/en-us/help-article/tax-refund/need-report-state-local-refun...

What other things were on your Schedule A?   Did you enter any state or local property tax you paid?

[fanfare]

Review the State and Local Income Tax Refund Worksheet.

There is a spot to enter your state sales tax.

Of course if you are using TurboTax Online, never mind, you can't see worksheets.

@dfpowers 

[fanfare]

If you checked the box on schedule A for sales tax, none of your state refund is taxable.

@dfpowers 

[dfpowers]

Unless there was a change to the tax law, that should not be the case.

[dfpowers]

For state and local taxes I claimed state sales taxes, real estate taxes, and personal property taxes.

[dfpowers]

Will give this a try.  They need to fix the interview process since it does lead to the right conclusion

[Hal_Al]

The TurboTax interview is complicated* and it's easy to make mistakes.  If you know your refund is not taxable, just don't enter it (or change it to 0), or check the box that says you used the standard deduction last year.

Lying to TurboTax to get it to do what you want does not constitute lying to the IRS. 

*Particular to your situation, there is a screen where you need to  indicate that the box on line 5a  (option to deduct sales tax) of last year's Schedule A is checked