State tax refund

[Brad Imsdahl]

I'm not sure I agree. It depends. The only reason for the taxable refund in Example 2 from IRS Pub 525 is because the taxpayer got a sales tax refund. Had the taxpayer not receive any sales tax refund, none of the state income tax refund would have been taxable, as the Pub says "Since you did not choose to deduct the state income tax, you do not include the state income tax refund in income.”

Give an example where a taxpayer chooses to deduct Sales Tax because it is greater than income tax, never receives a Sales Tax refund, but has to pay tax on the state income tax refund. Without receiving a sales tax refund, I can't think of any scenario where the income tax refund would ever be taxable.

[dyne]

state tax refund

Now, I am confused again.

[Brad Imsdahl]

Know, I am confused again.

Look at the two examples again in IRS pub 525. Where is a state income tax refund ever included in income when the general sales tax deduction was claimed?

The only example given was when there was also a sales tax refund. And the 1040 instructions for line 10 say, "none of your refund is taxable if, in the year you paid the tax, you....(b) elected to deduct state and local general sales taxes instead of state and local income taxes."

So I would say it is very clear. The only reason to go to IRS Pub 525 is when you have to figure out how much of a State Sales Tax refund might be taxable.

[dyne]

state tax refund

Thank you Brad:
Now, I understand. Sorry to be so dense.
You are most kind
Fred