William,a single taxpayer,has $3,500 state income tax withheld from his paychecks in 2012.When he filed his 2012 state income tax return on April 15,2013,he calculated and received a $600 refund.The $600 refund was received on May 27,2013.What are the federal tax effects of the state income tax events of 2012 and 2013?
I.If his itemized deductions total $6,000 in 2012,William includes $300 in gross income for 2013
II.If he did not itemize his deductions in 2012,none of the refund is included in 2013 gross income.

Question

Quizplus · Accepted Answer

The state income tax refund is included in gross income in the year received. If the taxpayer itemized deductions in the year the state income tax was paid, the amount of the refund included in gross income is reduced by the amount of the itemized deductions that were attributable to the state income tax deduction. In this case, William itemized deductions of $6,000 in 2012, so the amount of the refund included in gross income for 2013 is $600 - $300 = $300.

William,a Single Taxpayer,has $3,500 State Income Tax Withheld from His