Opal deducted $2,400 of state income taxes on her tax return last year. This year she received a state income tax refund of $170. What amount of the refund, if any, should Opal include in her gross income if last year her total itemized deductions exceeded the standard deduction by $350?

Question

Quizplus · Accepted Answer

Refund amounts are included in gross income only to the extent that the original deduction provided a tax benefit. The $2,400 of deduction produced a tax benefit of $350 so the entire $170 is included in income.

Opal Deducted $2,400 of State Income Taxes on Her Tax