Question

Other itemized deductions: Taxes Taxes are deductible on Schedule A. What kind of taxes are included in this category? Can we deduct our federal taxes here? Why or why not? What happens if I deduct my state income taxes in one year and get a refund next year? Do I have to include this in income? Recall the tax benefit rule

Answer 1

Solution:-

Taxes are deductible on Schedule A. What kind of taxes are included in this category:-

Taxes paid by you includes:-

5 State and local (check only one box):

a Income taxes, or

b General sales taxes

6 Real estate taxes (see instructions)

7 Personal property taxes

8 Other taxes. List type and amount

Can we deduct our federal taxes here? Why or why not:-

Some taxes and fees you can't deduct on Schedule A include federal income taxes, social security taxes, transfer taxes (or stamp taxes) on the sale of property, homeowner's association fees, estate and inheritance taxes, and service charges for water, sewer, or trash collection. Refer to the Form 1040 Instructions and Publication 17 for more taxes you can't deduct. You may be subject to a limit on some of your itemized deductions including nonbusiness taxes. In addition to these limits, there may be a phaseout (reduction of) your total itemized deductions based on your adjusted gross income. Please refer to the Form 1040 Instructions and Topic No. 501 for the limitations.

What happens if I deduct my state income taxes in one year and get a refund next year? Do I have to include this in income:-

Report last year’s state or local tax refund, and we’ll figure out if it’s taxable or not.

If all three of the following are true, your refund counts as taxable income:

• You itemized deductions last year, instead of taking the standard deduction.
• You claimed state and local income taxes (not general sales taxes).
• Claiming the deduction helped you increase your federal refund or lower your tax bill.

Even when your refund is taxable, it may not be the entire amount. It depends on how much the deduction affected your refund or tax bill. Just answer a few simple questions about last year’s refund, and we’ll calculate the taxable amount for you.