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.a2a_count:before{border:solid transparent;border-width:0 4px 4px 4px;content:\"\";height:0;left:50%;line-height:0;margin:-4px 0 0 -4px;position:absolute;top:0;width:0}.a2a_vertical_style .a2a_count:before{border-bottom-color:#ccc}.a2a_vertical_style .a2a_count:after{border-bottom-color:#fff;margin-top:-3px}.a2a_nowrap{white-space:nowrap}.a2a_note{margin:0 auto;padding:9px;font-size:12px;text-align:center}.a2a_note .a2a_note_note{margin:0;color:#2A2A2A}.a2a_wide a{display:block;margin-top:3px;border-top:1px solid #EEE;text-align:center}.a2a_label{position:absolute!important;clip:rect(1px 1px 1px 1px);clip:rect(1px,1px,1px,1px);clip-path:polygon(0 0,0 0,0 0);-webkit-clip-path:polygon(0 0,0 0,0 0);overflow:hidden;height:1px;width:1px}.a2a_kit,.a2a_menu,.a2a_modal,.a2a_overlay{-ms-touch-action:manipulation;touch-action:manipulation}.a2a_dd img{border:0}.a2a_button_facebook_like iframe{max-width:none}<\/style>\n<p><script src=\"\/\/gateway.foresee.com\/code\/19.5.2\/fs.feedback.js\" type=\"text\/javascript\" charset=\"utf-8\" async=\"\" data-vendor=\"fs\" data-requirecontext=\"_\" data-requiremodule=\"\/\/gateway.foresee.com\/code\/19.5.2\/fs.feedback.js\"><\/script> <script src=\"\/\/gateway.foresee.com\/code\/19.5.2\/fs.survey.js\" type=\"text\/javascript\" charset=\"utf-8\" async=\"\" data-vendor=\"fs\" data-requirecontext=\"_\" data-requiremodule=\"\/\/gateway.foresee.com\/code\/19.5.2\/fs.survey.js\"><\/script> <script src=\"\/\/gateway.foresee.com\/code\/19.5.2\/fs.record.js\" type=\"text\/javascript\" charset=\"utf-8\" async=\"\" data-vendor=\"fs\" data-requirecontext=\"_\" data-requiremodule=\"\/\/gateway.foresee.com\/code\/19.5.2\/fs.record.js\"><\/script> <script src=\"\/\/gateway.foresee.com\/code\/19.5.2\/fs.utils.js\" type=\"text\/javascript\" charset=\"utf-8\" async=\"\" data-vendor=\"fs\" data-requirecontext=\"_\" data-requiremodule=\"\/\/gateway.foresee.com\/code\/19.5.2\/fs.utils.js\"><\/script> <script src=\"\/\/gateway.foresee.com\/code\/19.5.2\/fs.trigger.js\" type=\"text\/javascript\" charset=\"utf-8\" async=\"\" data-vendor=\"fs\" data-requirecontext=\"_\" data-requiremodule=\"\/\/gateway.foresee.com\/code\/19.5.2\/fs.trigger.js\"><\/script><\/p>\n<div class=\"pup-main-container container\">\n<div class=\"row\">\n<div class=\"pup-header-content-rt no-gutter col-sm-12 col-md-9\">\n<div class=\"region region-content\">\n<article class=\"pup-article full clearfix row\">\n<div class=\"col-md-12 col-sm-12 col-xs-12\">\n<div class=\"field field--name-body field--type-text-with-summary field--label-hidden field--item\">\n<p>IR-2019-59, March 29, 2019<\/p>\n<p>WASHINGTON \u2014 The Internal Revenue Service today clarified the tax treatment of state and local tax refunds arising from any year in which the new limit on the state and local tax (SALT) deduction is in effect.<\/p>\n<p>In <a title=\"Revenue Ruling 2019-11 (PDF)\" href=\"https:\/\/www.irs.gov\/pub\/irs-drop\/rr-19-11.pdf\" data-entity-uuid=\"dcdd6b3e-1c30-498a-a4da-af20e477694c\" data-entity-type=\"media\" data-entity-substitution=\"pup_linkit_media\">Revenue Ruling 2019-11 (PDF)<\/a>, posted today on IRS.gov, the IRS provided four examples illustrating how the long-standing tax benefit rule interacts with the new SALT limit to determine the portion of any state or local tax refund that must be included on the taxpayer\u2019s federal income tax return. Today\u2019s announcement does not affect state tax refunds received in 2018 for tax returns currently being filed.<\/p>\n<p>The Tax Cuts and Jobs Act (TCJA), enacted in December 2017, limited the itemized deduction for state and local taxes to $5,000 for a married person filing a separate return and $10,000 for all other tax filers. The limit applies to tax years 2018 to 2025.<\/p>\n<p>As in the past, state and local tax refunds are not subject to tax if a taxpayer chose the standard deduction for the year in which the tax was paid. But if a taxpayer itemized deductions for that year on <a title=\"About Schedule A (Form 1040), Itemized Deductions\" href=\"https:\/\/www.irs.gov\/forms-pubs\/about-schedule-a-form-1040\" data-entity-uuid=\"a8bcfef0-4fd5-49dc-82b9-8284e53c14db\" data-entity-type=\"node\" data-entity-substitution=\"canonical\">Schedule A<\/a>, Itemized Deductions, part or all of the refund may be subject to tax, to the extent the taxpayer received a tax benefit from the deduction.<\/p>\n<p>Taxpayers who are impacted by the SALT limit\u2014those taxpayers who itemize deductions and who paid state and local taxes in excess of the SALT limit\u2014may not be required to include the entire state or local tax refund in income in the following year. A key part of that calculation is determining the amount the taxpayer would have deducted had the taxpayer only paid the actual state and local tax liability\u2014that is, no refund and no balance due.<\/p>\n<p>In one example described in the ruling, a single taxpayer itemizes and claims deductions totaling $15,000 on the taxpayer\u2019s 2018 federal income tax return. A total of $12,000 in state and local taxes is listed on the return, including state and local income taxes of $7,000. Because of the limit, however, the taxpayer\u2019s SALT deduction is only $10,000. In 2019, the taxpayer receives a $750 refund of state income taxes paid in 2018, meaning the taxpayer\u2019s actual 2018 state income tax liability was $6,250 ($7,000 paid minus $750 refund). Accordingly, the taxpayer\u2019s 2018 SALT deduction would still have been $10,000, even if it had been figured based on the actual $6,250 state and local income tax liability for 2018. The taxpayer did not receive a tax benefit on the taxpayer\u2019s 2018 federal income tax return from the taxpayer\u2019s overpayment of state income tax in 2018. Thus, the taxpayer is not required to include the taxpayer\u2019s 2019 state income tax refund on the taxpayer\u2019s 2019 return.<\/p>\n<p>See the ruling for details on all four examples.<\/p>\n<p>Today\u2019s ruling has no impact on state or local tax refunds received in 2018 and reportable on 2018 returns taxpayers are filing this season. For information, including worksheets for reporting these refunds, see the 2018 <a title=\"2018 instructions for Form 1040, U.S. Individual Income Tax Return\" href=\"https:\/\/www.irs.gov\/instructions\/i1040gi\" data-entity-uuid=\"fd5fd15c-86d4-4b67-8c33-7a2376297753\" data-entity-type=\"node\" data-entity-substitution=\"canonical\">instructions<\/a> for Form 1040, U.S. Individual Income Tax Return, and <a title=\"About Publication 525, Taxable and Nontaxable Income\" href=\"https:\/\/www.irs.gov\/forms-pubs\/about-publication-525\" data-entity-uuid=\"033e1a10-4c22-4ff5-9ba9-e314f1c77bde\" data-entity-type=\"node\" data-entity-substitution=\"canonical\">Publication 525<\/a>, Taxable and Nontaxable Income.<\/p>\n<p>For information about other TCJA provisions, visit <a title=\"Tax Reform\" href=\"https:\/\/www.irs.gov\/tax-reform\" data-entity-uuid=\"e8471673-3c14-4749-a65f-96bb3ea9e361\" data-entity-type=\"node\" data-entity-substitution=\"canonical\">IRS.gov\/taxreform<\/a>.\u00a0\u00a0<a href=\"https:\/\/www.irs.gov\/newsroom\/with-new-salt-limit-irs-explains-tax-treatment-of-state-and-local-tax-refunds\">https:\/\/www.irs.gov\/newsroom\/with-new-salt-limit-irs-explains-tax-treatment-of-state-and-local-tax-refunds<\/a><\/p>\n<\/div>\n<\/div>\n<\/article>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>With new SALT limit, IRS explains tax treatment of state and local tax refunds | Internal Revenue Service IR-2019-59, March 29, 2019 WASHINGTON \u2014 The Internal Revenue Service today clarified [&hellip;]<\/p>\n","protected":false},"author":88892,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4,1,3],"tags":[],"class_list":["post-437","post","type-post","status-publish","format-standard","hentry","category-business","category-general","category-tax-tips"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v24.7 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>With new SALT limit, IRS explains tax treatment of state and local tax refunds - Ayoub Sidhum &amp; Co.<\/title>\n<meta name=\"description\" content=\"Ayoub and Associates CPA Firm is a full service Corona CPA firm that provides services in accounting, tax preparation and planning, IRS audit, and sales tax. 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