Margo has $2,200 withheld from her wages for state income taxes during 2015. In March of 2015, she paid $400 in additional taxes for her 2014 state tax return. Her state income tax liability for 2015 is $2,700 and she pays the additional $500 when she files her 2015 state tax return in April of 2016. What amount should Margo deduct as an itemized deduction for state income taxes on her 2015 federal income tax return, assuming she elects to deduct state and local income taxes?

Question

Quizplus · Accepted Answer

Margo's total state income tax payments for 2015 were $2,200 + $500 = $2,700, which is also her state income tax liability for 2015. She cannot deduct the $400 she paid in March 2015 for her 2014 state tax return because those are considered taxes paid in a prior year. Therefore, the maximum amount she can deduct as an itemized deduction for state income taxes on her 2015 federal income tax return is $2,700.

Margo Has $2,200 Withheld from Her Wages for State Income