[startupcfo]

My understanding is that tax refunds are part of AGI.

One of the questions in the MCQ states that

“State tax refunds are not taxable to an individual who does not itemize deductions as no prior tax benefit was received “

A) I’m confused – why would it matter whether you itemize or take the standard deduction? You’re still enjoying the benefit of additional cash either way.

B) Secondly, what do they mean when they say no prior tax benefit was received?

AUD - 93
BEC - 87
FAR - 77
REG - 77

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Corporate finance leader

BEC - 87 | 02/28
REG - 70 | 06/10, REMATCH | 08/30
AUD - XX | 09/10
FAR - XX | 12/10

[CPA2BEE]

State tax refunds are taxable to those who itemize because as part of itemizing the taxpayer can deduct state and local taxes paid. So since those who itemize receive a tax benefit for it, they must recognize refunds in AGI

CA CPA - est. Dec 2016

FAR - 80
AUD - 82
BEC - 80
REG - 85

ETHICS - 90
EXPERIENCE - COMPLETE
Application for California license mailed 8/4/2016

[CPA2BEE]

Those who do not itemize do not receive the benefit of being able to deduct state and local taxes, hence why it is excluded from their AGI….

CA CPA - est. Dec 2016

FAR - 80
AUD - 82
BEC - 80
REG - 85

ETHICS - 90
EXPERIENCE - COMPLETE
Application for California license mailed 8/4/2016

[Author]

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