Margarita,a single individual,has $2,000 in state taxes withheld from her salary in 2012.Her total itemized deductions are $7,500.She claims the $2,000 as an itemized deduction on her 2012 tax return.In 2013,she receives a state income tax refund of $400.Under the tax benefit rule she has to report income in 2013 of

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According to the tax benefit rule, if a taxpayer claims a deduction for taxes paid in a previous year and subsequently receives a refund of those taxes, the refund amount must be included in gross income in the year of receipt to the extent that the deduction provided a tax benefit in the prior year. In this case, Margarita claimed a $2,000 deduction for state taxes paid in 2012, which reduced her taxable income in that year. As a result, the $400 refund in 2013 must be included in her gross income for that year. Margarita does not need to file an amended 2011 tax return or reduce her itemized deductions.

Margarita,a Single Individual,has $2,000 in State Taxes Withheld from Her