Will Turbo Tax treat the recovery of excess state tax withholding as income in my 2019 tax return even though I could not list it as an itemized deduction in 2018?

[wsmith2100]

The new SALT deduction limitations require me to take the standard deduction instead of itemizing. My state tax witholdings were significantly overstated because I work from home outside the state where the employer is located. Since I was not allowed to itemize the excess deductions in my 2018 return, I am concerned that my 2019 return will record the state tax recovery as income even though I did not list it as a deduction in 2018.

[Rachel_W · Accepted solution]

No, you will not need to treat the recovery of the state withholding tax as income on your 2019 Tax Return since you were unable to use it as an itemized deduction due to the SALT limitations.

[wsmith2100]

For clarification, does that mean that Turbo Tax will 'know' not to record the 1099G that I will get back from the state as income on my 2019 return?

[Rachel_W]

TurboTax will ask questions in the interview process about your 1099-G to determine if it is taxable or not. Check out this TurboTax FAQ: <a rel="nofollow" target="_blank" href="https://ttlc.intuit.com/questions/1899663-do-i-need-to-report-the-state-or-local-refund-i-got-last-y...>

[VolvoGirl]

If you took the Standard Deduction then the state refund will not be taxable.  When you enter the 1099G next year Turbo Tax will ask if you took the Standard Deduction.  Actually since you took the SD and you know it will not be taxable you don't even have to enter the 1099G at all next year.

[VolvoGirl]

Here's a couple screen shots I made of this year's 1099G entry