[Anonymous]

I am confused on State and Local Tax Refunds whether it is included as partially taxable income or fully taxable income upon assumption of uses of itemized deduction in prior year.

Let’s say, State and Local Tax Refunds in current year is $500. itemized deduction used in prior year was $6000 (Standard deduction was $5800). In current year, do I include full of $500 as taxable income? On the other hand, do I include partial refunds of $200 ($6000 – $5800) as taxable income in current year?

i am very confused. your advise will be greatly appreciated.

[sbarkerACPA]

If you benefited from itemizing the refund then yes it is included in the next year's tax return as income, primarily because you benefited.

HTH

BEC: 74;81
AUD: 77
REG: 71; 80
FAR: 78
License for CPA----APPROVED
CPA Class of 2013

[sbarkerACPA]

Yes the entire refund amount (for your example) $500.

BEC: 74;81
AUD: 77
REG: 71; 80
FAR: 78
License for CPA----APPROVED
CPA Class of 2013

[Rukus]

No, the full $500 is NOT taxable. Only the $200 above the standard deduction is taxable. The reason is if you didn't itemize and took the standard deduction all of your refund is nontaxable, so only the portion in excess of the standard deduction is taxable.

FAR - 81 (8/31/12)
AUD - 93 (10/19/12)
BEC - 79 (11/27/12)
REG - 92 (2/8/13) DONE! All 1st attempt!

[Anonymous]

first of all, I apologize my example did not provide enough information. however, all of you got what I try to point out. I should have also added that the benefit received from the state and local tax deduction was the 200 that itemized deductions exceeded standard. Anyway, if anyone not sure about this matter like me, I confirmed with Becker that partial refunds of $200 is included in taxable income in current year due to tax benefit rule. Thanx.

[sbarkerACPA]

@Rukus thanks!! I take Regulations in a couple weeks!! @CPApunk sorry about that.

BEC: 74;81
AUD: 77
REG: 71; 80
FAR: 78
License for CPA----APPROVED
CPA Class of 2013

[Author]

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