State Refunds taxable

[JON]

I always see a nice schedule allocating state refunds between years when the payments are made. Estimates made in Jamuary of the folowing year.

But evidently if you are subject to itemized being phased out including state income taxes paid any refund is still fully taxable. How did we let that happen????

[appelman]

State Refunds taxable

Have you looked at p. 24 of Pub. 525?

[gkaiseril]

There is a workseet for that.

Did the taxpayer take the sales tax for the deduction?

Only state imcome tax withheld or paid and refunded is taxable.