How do I report my 2023 NJ Anchor rebates on my federal 1040 if I was limited by SALT in prior years?

[ROBERTG22]

Rebates were for 2019 and 2020.  Where are they entered on Turbotax?

[DMarkM1 · Accepted solution]

You will enter any taxable amount of those prior year recoveries as a "State/Local Tax Refund".  In "Wages & income" navigate to "Other common Income" and "Start/Revisit" the "Refunds from State/Local returns" topic.

You will enter year's refund separately.  Enter the total state/local refund you received from NJ for one of the years.  That amount should include not only anchor payments but state income tax refunds as well. 

Continue and done.  

This will bring up another page where you will enter the taxable amount if any of those refunds.  You will use Publication 525, Worksheet 2a, to figure the taxable amount if any.  Generally, if the total refunds for the year do not exceed the 10,000 SALT they will not be taxable.

Repeat for the next tax year refund. 

[MTamborra]

Hello, 

I also received 2019 and 2020 Anchor payments in tax year 2023 - though I don't know how SALT applies in my situation. I was researching on how this should be reported on my federal return and glad I came across this thread. 

In my findings, it was said that "Anchor payments will reduce the real-estate tax expense on federal returns" and therefore should not be considered income. If my real estate taxes are paid out of escrow and included on my 1098 (Mortgage Interest Statement) how would I reduce those real estate taxes by the Anchor payment? There would be a discrepancy by doing so as the revised number would not match taxes paid on the 1098. 

https://www.njspotlightnews.org/2023/10/new-jersey-society-of-certified-public-accountants-anchor-au...

Thank you.

[DMarkM1]

No, you are not going to directly reduce the property (real estate) taxes entered from your form 1098.  Instead, if you itemized in the years for which you received Anchor refunds use Worksheet 2a in Publication 525 to figure the taxable amount, if any, of your state local refunds (if you itemized in those prior years).  You will notice how the SALT limit affects that calculation on lines 3, 4 and 5 on the worksheet. Depending on the refund amount as compared to the itemized deductions taken, some, all or none of the refunds may be taxable.  

Once you know the taxable amount, if any, for each year you received a state/local refund (including Anchor) you can make the entries in the "Other Common Income>form 1099G" topic.