Prior year State Refund Taxable?

8 replies
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I have a client who received in 2022 a $50,000 state refund from an amended return that was prepared. The amended return was for the 2020 tax year.

In 2020, his state and local (and RE taxes) were $144,000 (capped at $10K of course).

I'm figuring that since he didn't get a tax benefit on the 2020 Sched A for the $50,000 deduction that the refund is not taxable in 2022. Am I thinking through this correctly?

Would he also need to file a CA tax return for 2022 and pay tax on that refund?

Any help would be appreciated.

ProSeries Professional

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Just-Lisa-Now-

Intuit Community Champion

Your thinking is correct, there is a state refund worksheet that does that math for you and excludes the refund from income automatically....no CA return is needed, thats not income to CA.

♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪

E

Ephesians3-14Author

Level 7

Yes, but interestingly, on that worksheet (which I was using), it requires you to enter the $50,000 in Part VII. When I do that, it results in taxing the $50,000....still confused. Maybe I should just leave it off of the 2022 tax return all together?

dkh

Level 15

When you are entering information in Part VII are you entering the $50,000 in the taxable amount column?

If yes, wouldn't you enter $0 if you've determined it shouldn't be taxed ?

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