Question

This year Mary received a $200 refund of state income taxes that she deducted on her tax return last year. Mary included a total of $4,000 of state income taxes when she itemized deductions last year. What amount of the refund, if any, should Mary include in her gross income this year

Answer 1

The amount of $200 that was added to the itemized deductions of $4,000 was above the standard deduction by the amount of $200

Step-by-step explanation:

Any amount that was refunded will have to be added to the gross income only on one condition which is when the main deduction amount provided a tax benefit. Therefore based on the information given the amount of $4,000 of the deductions provided a tax benefit of the amount of $200 which means that the itemized deductions was above the standard deduction by the amount of $200.