I hope somebody here can help me with this question:
I am living in Oregon, and I am puzzled on how to correctly enter the state income tax "kicker" from last years return (2017).
I did receive a form 1099G showing the kicker amount.
Here is the full scenario:
For 2017, $12,000 has been deducted from my paycheck for state income taxes. That's the number ($12K) that I claimed on the 2017 return (itemized deduction).
For the state return, the kicker (some sort of refund due to the state having collected too much?) amount turned out to be $700. That $700 was added to my credits for a total of $12,700 (=12,000+700). The tax table showed that my total state income tax is $12,400 based on income and Federal return.
So basically, if there would not have been the kicker, I would have owed $400 (=12,400-12,000), but with the kicker I basically got $300 (=12,700-12,400) back.
Now, fast forward to this year. I got a form 1099G showing the $700 kicker, but not the $300 refund.
What number goes on line 10 of schedule 1?
(a) $300 (the refund I got)
(b) $700 (the kicker amount) or
(c) $1,000 (kicker + refund)
Which is the correct number?
I have the bad feeling that it's (c), even though I think it should be (a), because the total state income tax that I ended up paying in 2017 is $11,700 (=12,000-300 refund), and $12K has been reported on the 2017 return, so bottom line I got $300 back.
Turbo Tax has btw used (b), but I somehow don't trust that.
If somebody could help me out here, I would really appreciate it!
I think $700 is the right answer. If you itemize on your federal return, you get a deduction for total state income taxes paid ( or you used to) and then if you get a refund of state taxes, it is income to you in the next year because you got a federal deduction for the whole amount paid ($12,700). Turbotax should have brought forward the $700 into 2018 as income on the federal return.
The state treated you $700 as a deposit or estimated payment so you did receive a "refund" of $700. Currently $400 is used for you current state tax and the excess $300 refunded. The taxable amount would be the $700 BUT, The "Tax Benefit Doctrine" may apply. The $700 is taxable "to the extent" you received a tax benefit. A good tax program will calculate this for you.
My accountant put the kicker on line 10 under Taxable refunds, credits, or offsets of state and local income taxes.
The kicker is a uniquely Oregon thing. It "kicks in" when the state revenue exceeds projections by at least 2%. The excess is then refunded back to taxpayers as a credit on your taxes. For a while it was returned via an extra check, usually just before Christmas.
Thanks a lot for your responses, Sharon, rangerj & gacpa.
It looks like you all agree that I should enter the $700 kicker amount only as it looks like.
I am not 100% sure I understand why the $300 refund would not have to be added as well, is it because the $400 minus $300 = $100 would be added to state income taxes for 2018? If that's the case, then that would make sense.