If you're referring to the federal Schedule A Line 5, it's no problem to check box A (for state income taxes) one year and box B (sales taxes) the next. You are free to pick which one you want to deduct, and you may change year-to-year. With respect to deducting state income taxes on your federal return, you want to deduct the amount of taxes you paid in 2007 - whether paid through withholding, estimated tax payments, or 2007 payments made with your '06 return. Sounds like you can include both your 2007 withholding, plus whatever amount you paid in 2007 for 2006 taxes. Be sure to exclude any overpayment if you're looking at a state refund for 2007.
When you say the amount I paid in 2007 for 2006 taxes, can I assume that for me, that amount is zero because I got a refund on my state income tax last year? Or does that amount also include the taxes that were paid for by my witholdings?
Not necessarily, no. In your earlier comment, you referred to "all of the $$$ that I paid in March 2007 for my 2006 state income tax return." What, exactly, were you paying? Amounts withheld in 2007, yes.
Sorry for the confusion. How about this hypothetical situation. Let's say that back in March of 2007 I was preparing my 2006 state income tax return. I think I ended up paying about $6K in state income tax but since $8K was withheld during the calendar year of 2006, I got a refund for $2K. Now fast forward to the present and I'm now preparing my 2007 state income tax return. I think I will owe about $7K for in state income tax but I think I will receive a $2K refund b/c of $9K being withheld during the calendar year of 2007. Now I need to prepare my federal return for 2007. How much should I list on line 5 of Form 1040 Schedule A?
$9K. But if you rolled any of the 2006 overpayment ($2K) into 2007, be sure to include that amount too.
I didn't roll any of the 2006 overpayment into 2007. I just collected the check and spent it. If I claim $9K on line 5 and get a $2K return, does that $2k count as income that I need to account for on next year's return? BTW, many thanks!
Maybe. (Probably.) See the above link to federal Form 1040 line 10 that will provide instructions.....and a worksheet.
Is there a cap on student loan interest deductions? also, is there a cap on donation(such as church donations) deductions? thanks gurus!
thanks a lot wcharriscpa, last question pls, can i deduct expenses incurred towards career/educational enhancement? say for example i wanted to invest in a couple of professional certifications, so i spend $500 on 3 microsoft certification exams, can i deduct this? thanks.
Hello, Does the first in, first out rule on stock sales apply across taxable accounts at separate brokerages? I own stock in the same company in two taxable accounts, and I sell the more recent purchase with the higher basis in one account. Does the fact that I can match the sale and purchase by account cover my tax lot accounting requirements for identifying the shares I sold? Thanks in advance