Margo has $2,200 withheld from her wages for state income taxes during 2016. In March of 2016, she paid $400 in additional taxes for her 2015 state tax return. Her state income tax liability for 2016 is $2,700 and she pays the additional $500 when she files her 2016 state tax return in April of 2017. What amount should Margo deduct as an itemized deduction for state income taxes on her 2016 federal income tax return, assuming she elects to deduct state and local income taxes?

Question

Quizplus · Accepted Answer

Margo can deduct the total paid during the tax year for state income taxes, including the $400 in March 2016 for her 2015 state tax return, and the $2,700 she owes for 2016, totaling $3,100. However, she paid the additional $500 when she files her 2016 state tax return in April of 2017, which is not included in the tax year 2016. Therefore, her itemized deduction for state income taxes on her 2016 federal income tax return is $2,600 ($2,200 withheld in 2016 plus $400 paid in March 2016). Therefore, the correct answer is C) $2,600.

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