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Apply the tax benefit rule to determine the amount of the state income tax refund included in gross income in 2020.

If an amount is zero, enter "0".

a. Myrna and Geoffrey filed a joint tax return in 2019. Their AGI was $85,000, and itemized deductions were $25,100, which included $7,000 in state income tax and no other state or local taxes. In 2020, they received a $1,800 refund of the state income taxes that they paid in 2019. The standard deduction for married filing jointly in 2019 was $24,400.
_________ $

b. Veronica filed as a single taxpayer in 2019. Her AGI was $230,000, and itemized deductions were $42,000. Her local property taxes were $13,000 and her state income taxes were $17,000. In 2020, Veronica received a $2,100 refund of the state income taxes she paid in 2019. The standard deduction for single filers in 2019 was $12,200.
_________ $

Respuesta :

Solution :

a). The itemized deduction is given = $25,100

The standard deduction is = $24,400

The state income tax which needs to be added in year 2020 is the difference between the itemized deduction and the standard deduction, i.e.,

= $25,100 - $24,400

= $700

As per the tax benefit rule, the amount of 700 dollar will be included in the gross income of the year 2020.

b). In this case, the income tax of the State is higher as compared to the standard deduction in the year 2019. So here the answer is zero.

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