ProConnect HelpIntuit HelpIntuit

State and Local Refunds Taxable Worksheet for Form 1040

SOLVEDby IntuitLacerte Tax33Updated February 09, 2022

To find out how the taxable portion of state and local refunds is calculated:

  1. Go to Screen 14.2, State Tax Refunds, Unemployment Comp.
  2. Click on the State Refund Wksht in the left-hand navigation panel.
  3. Mark the Itemized in prior year box.
    • If this box has not been checked, state income taxes gave no tax benefit in the prior year; therefore the entire state tax refund is nontaxable
  4. Additional entries on this screen are required to calculate the taxable portion of the state tax refund. See calculation below.

The worksheet is calculated as follows:

Line Instruction Input Field Name on Screen 14.2 or [Calculation]
1 State and local income tax refunds (prior year) Income tax refunds, credits or offsets (2)
2 Refunds attributable to post 12/31/20XX payments per IRS Pub. 525 Refunds attributable to post-20XX ES/extension payments
3 Net state and local income tax refunds [Add lines 1 and 2]
4 State and local taxes paid from prior year Schedule A, line 5 State and local income taxes paid
5 Prior year allowable sales tax deduction Allowed or allowable general sales tax deduction
6 Excess of income taxes deducted over sales taxes deducted State and local income taxes paid less Allowed or allowable general sales tax deduction
7 Enter the smaller of line 3 or line 6 [Smaller of line 3 or line 6]
8 Itemized deductions from prior year Schedule A, line 29 Itemized deductions from Schedule A, line 29
9 Prior year recomputed itemized deductions (if phase out)
10 Prior year base standard deduction Base Standard Deduction
11 Prior year add'l standard deduction for age/blindness Number of age/blind exemptions
12 Prior year disaster loss / new motor vehicle deduction New motor vehicle tax deduction
13 Prior year total standard deduction [Add lines 10, 11, and 12]
14 Enter the larger of line 9 or line 13 [Larger of line 9 or line 13]
15 Subtract line 14 from line 8 (not less than 0) [Line 8 minus Line 14]
16 Enter the smaller of line 7 or line 15 [Smaller of line 7 or line 15]
17 Negative taxable income (prior year)
18 Refund with no tax benefit due to AMT or non refundable credits Refund with not tax benefit due to AMT, non refundable credits, or 0% capital gain or qualified dividend rate
19 State and local refunds taxable this year [Add lines 16, 17, and 18]

You cannot force the State Refund Worksheet to generate if the State Refund is nontaxable.

For more information, please review the IRS instructions for Form 1040, namely page 85.

Was this helpful?

You must sign in to vote, reply, or post
Lacerte Tax

Sign in for the best experience

Ask questions, get answers, and join our large community of Intuit Accountants users.