Lynnette is a single individual who receives a salary of $36,000.During 2013,she has $6,800 withheld for payment of her federal income taxes and $2,900 for her 2013 state income taxes.In 2014,she receives a $450 refund after filing her 2013 federal tax return and a $750 refund after filing her 2013 state tax return.
I
If Lynnette has total itemized deductions of $6,000 on her 2013 federal tax return,she must include the entire $750 refund in her 2014 gross income.
II)If Lynnette uses the standard deduction in filing her 2013 federal income tax return,the $750 refund is not taxable in 2014.

Question

Quizplus · Accepted Answer

Statement I is incorrect because Lynnette can only include the amount of the refund that gave her a tax benefit in the previous year in her gross income for the current year. In this case, since Lynnette used the standard deduction in 2013, she did not receive any tax benefit from the state income tax refund, and therefore, she does not need to include it in her 2014 gross income.

Statement II is correct because if Lynnette uses the standard deduction, she does not need to include the state income tax refund in her 2014 gross income. The refund is not taxable because she did not receive any tax benefit from it in the previous year.

Lynnette Is a Single Individual Who Receives a Salary of $36,000.During