Question

Myrna and Geoffrey filed a joint tax return in 2018. Their AGI was $85,000, and itemized deductions were $24,700, which included $7,000 in state income tax and no other state or local taxes. In 2019, they received a $1,800 refund of the state income taxes that they paid in 2018. The standard deduction for married filing jointly in 2018 was $24,000.

Answer 1

Answer:

$700

Explanation:

to calculate the amount of state income tax refund that must be included in the 2019 tax return we can use the following equation:

state income tax refund included in gross income = itemized deduction - standard deduction = $24,700 - $24,000 = $700

the rest of the refund = $1,800 - $700 = $1,100, should not be included in the 2019 gross income