Federal and regional: what you need to know about different levels of taxes and refunds

Whether a state tax refund counts as federal income, according to NJ.

Do I have to pay federal taxes on the amount the state overpaid you?

The IRS has what is called a tax credit rule.

This rule says that if you receive a state income tax or real estate tax deduction within one year and receive a refund of some or all of the next year's payments, you must include the refund as income on your next year's tax return if there was a tax benefit from the deduction, as Bernie Keely, a Certified Financial Planner and Certified Public Accountant at Kiely Capital Management, said. Morristown.

“Predp Let's say you included income tax or property taxes in Schedule A, but then you took the standard deduction because it was more than your list of itemized deductions,” he said. – Because you used the standard deduction, there was no savings on the state income tax or real estate tax deduction,” – he said.

He said you didn't benefit from the deduction, so you don't need to include a refund or rebate on next year's tax return.

https://thesaxon.org/ News | March 31, 2022