Solved: Why do I have to pay income taxes on my state refund from last year
Sign Up

Why sign in to the Community?

  • Submit a question
  • Check your notifications
or and start working on your taxes
Announcements
TurboTax has you covered during Covid. Get the latest second stimulus info here.
cancel
Showing results for 
Search instead for 
Did you mean: 
New Member

Why do I have to pay income taxes on my state refund from last year

 
1 Best answer

Accepted Solutions
New Member

Why do I have to pay income taxes on my state refund from last year

If you took the state and local tax deduction last year and itemized, the refund will be taxable this year if the deduction benefitted (reduced) last year's tax bill. This is true even if you opted to apply the refund to this year's state or local return.

But if you took the sales tax deduction or the standard deduction last year, it won't be taxable on this year's return. It also won't be taxable if last year's return was subject to the AMT (Alternative Minimum Tax) and the refund amount was less than the amount disallowed under AMT.

After you enter last year's state or local refund in TurboTax, we'll ask followup questions to determine if it's taxable.

Tip: When you transfer last year's return over, we'll also bring over last year's state and local refunds if last year's tax file includes those returns.

View solution in original post

1 Reply
New Member

Why do I have to pay income taxes on my state refund from last year

If you took the state and local tax deduction last year and itemized, the refund will be taxable this year if the deduction benefitted (reduced) last year's tax bill. This is true even if you opted to apply the refund to this year's state or local return.

But if you took the sales tax deduction or the standard deduction last year, it won't be taxable on this year's return. It also won't be taxable if last year's return was subject to the AMT (Alternative Minimum Tax) and the refund amount was less than the amount disallowed under AMT.

After you enter last year's state or local refund in TurboTax, we'll ask followup questions to determine if it's taxable.

Tip: When you transfer last year's return over, we'll also bring over last year's state and local refunds if last year's tax file includes those returns.

View solution in original post

Dynamic Ads
v
Privacy Settings