Calvin miscalculated his income in 2016 and overpaid his state income tax by $10,000. In 2017, he amended his 2016 state income tax return and received a $10,000 refund and $900 interest. Calvin itemized his deductions in 2016, deducting $12,000 in state income tax and $30,000 total itemized deductions. As a result of the amended return in 2017, Calvin must recognize $10,900 of gross income.

Question

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Calvin received a refund of $10,000 and $900 interest, which totaled $10,900. Since he itemized deductions in 2016 and deducted $12,000 in state income tax, he must recognize the entire refund as income in 2017 according to IRS rules. He does not need to recognize the interest income because it is less than $600. Therefore, the statement is true.

Calvin Miscalculated His Income in 2016 and Overpaid His State