State Tax Refund Calculation

[tccpg289]

I understand that if you itemize deductions and then receive a state tax refund as a result, the refund is potentially taxable in the subsequent year.

However, there are considerations of the limitations on the itemized deductions (i.e. you are capped at $10k property taxes, and the difference of the itemized vs. the standard).

Can someone confirm the basic calculation? i.e. if the standard deduction is $24k, the taxpayer itemized and took $30k, resulting in a refund of $1k with their respective state, how much of the $1k is taxable?

Let's say this is a new client and I have their prior year return, and I am entering everything new in ProSeries. What is the best worksheet to calculate?

[Just-Lisa-Now-]

The state tax refund worksheet has a place where you can input the 2020 Sch A information to see how much of the refund is taxable

[qbteachmt]

"how much of the $1k is taxable?"

You confused Taxable and Reportable. You Report it, because itemization means things were reported to attempt to benefit from them. Since it was reported and resulted in a refund, the return of what was reported in the previous year is included in the year of the refund, to see how it affects that tax return.

If you were not itemizing, you would not be detailing taxes paid, to benefit from them as expense. That's why it is added back, later, if any of it is refunded. That won't make it taxable. It's just another piece of the puzzle.

[tccpg289]

So in short, it is not taxable?

[Just-Lisa-Now-]

You wont know how much, if any, is taxable until you fill out the worksheet.