Welcome back! Ask questions, get answers, and join our large community of tax professionals.
cancel
Showing results for 
Search instead for 
Did you mean: 

State taxable refund shows 0

parvitstax
Level 3

Hi all,

Is this a common issue still? I have clients with state refunds 1099G but 1040 always shows $0 is taxable. Is that correct that the bug from prior years is fixed? Or do I have to enter this in manually?

Labels (1)
0 Cheers
1 Solution

Accepted Solutions
jofijohnjoseph
Level 4

State tax refunds are only taxable IF the taxpayer itemized their deductions the prior year AND the state tax refund would have impacted the final amount of itemized deductions.  For example, if a taxpayer reported $10,400 of state taxes paid in 2019, received the $10,000 SALT cap, and then got a $600 refund in the spring of 2020 -- in this case, $200 would be taxable.

But if a taxpayer took the Standard Deduction, or if the state refund would not have impacted the itemized deductions, from the previous year, it is not a taxable amount.

In other words, it SHOULD be a rare event for you to see anything other than $0 as the taxable amount.

View solution in original post

3 Replies 3
jofijohnjoseph
Level 4

State tax refunds are only taxable IF the taxpayer itemized their deductions the prior year AND the state tax refund would have impacted the final amount of itemized deductions.  For example, if a taxpayer reported $10,400 of state taxes paid in 2019, received the $10,000 SALT cap, and then got a $600 refund in the spring of 2020 -- in this case, $200 would be taxable.

But if a taxpayer took the Standard Deduction, or if the state refund would not have impacted the itemized deductions, from the previous year, it is not a taxable amount.

In other words, it SHOULD be a rare event for you to see anything other than $0 as the taxable amount.

View solution in original post

Just-Lisa-Now-
Level 15
Level 15

Walk through the State Refund Worksheet to understand why.


♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪
mdtao31
Level 5

since the tax deductions are limited to 10,000 if your property taxes excede

the refund amount on 1099 g, then none are taxable

ps stay safe ,LARRY