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How to tell whether a 2023 return's state refund is taxable refund on 2024 return or not?
Case: Taxpayer XYZ filed his 2023 individual tax return using itemized deductions. He received both a federal and state tax refund for the 2023 tax year. As I prepare his 2024 Form 1040, I need to determine whether his 2023 state tax refund is taxable.
Here are his 2023 Schedule A/TAXES YOU PAID section details:
Line 5a state and local tax: $20,000
Line 5b real estate tax: $10,000
Line 5d: $30,000
Line 5e: $10,000
Question: Based on the above details, it appears that Taxpayer XYZ applied the $10,000 limit not his $20,000 taxes, my understanding is that the 2023 state tax refund is non-taxable. Could you confirm if this interpretation is correct?
Thank you for your help!
