Hi, if I filed a 2021 state tax return in the State of Delaware in Feb. 2022 for my daughter and she received a modest refund. Was I supposed to include the state tax refund as income on her 2022 Federal Return? Her 2022 taxable income was $0.00 after the standard deduction and exemptions. Thanks
A state tax refund from filing the prior year's taxes would only be taxable if there was a tax benefit - i.e., you took an itemized deduction for taxes paid. Since your daughter's return for 2021 took the standard deduction, then she didn't deduct the taxes on her 2021 return and the refund isn't taxable for 2021.
Enter a 2021 refund in the 2022 TurboTax program and TurboTax will confirm whether it's taxable.
See this help article for more information.
You should keep the records in case there is a question but if it did not change her tax liability, then there would not be any penalty or interest associated with the state refund. So it would not be necessary to amend the return for that item. If something else arises that would require an amendment, you can certainly add it to the return then.
A state tax refund from filing the prior year's taxes would only be taxable if there was a tax benefit - i.e., you took an itemized deduction for taxes paid. Since your daughter's return for 2021 took the standard deduction, then she didn't deduct the taxes on her 2021 return and the refund isn't taxable for 2021.
Enter a 2021 refund in the 2022 TurboTax program and TurboTax will confirm whether it's taxable.
See this help article for more information.
Thanks for the follow-up post. You did the right thing by entering the refund in TurboTax.
Actually I had already filed the Federal return. Do I need to submit a corrected return even though there are no tax consequences?
You should keep the records in case there is a question but if it did not change her tax liability, then there would not be any penalty or interest associated with the state refund. So it would not be necessary to amend the return for that item. If something else arises that would require an amendment, you can certainly add it to the return then.