NJ is now charging a convience fee to renew registration online

[Jack F]

Its only added back as income if you itemized your deductions in the prior year and included state taxes paid as a deduction.

So lets say you actually paid $5000 in state taxes in year 1 (either through witholdings or estimated payments).

When you file your federal tax return for Year 1 in April of Year 2, you would list $5000 state taxes paid on your schedule A.

Then at the same time you complete your state tax return for Year 1 and determine that you should only have paid $4000 which entitles you to a $1000 refund.

When this happens you are required to add the $1000 refund back to your income in year 2. The net effect is that you only get a deduction for the actual net tax paid of $4000.

That makes senses; I never paid much attention to it just past everything along to my accountant.
I haven’t received a refund in a few years now.

 

[Mr Salt]

Its only added back as income if you itemized your deductions in the prior year and included state taxes paid as a deduction.

So lets say you actually paid $5000 in state taxes in year 1 (either through witholdings or estimated payments).

When you file your federal tax return for Year 1 in April of Year 2, you would list $5000 state taxes paid on your schedule A.

Then at the same time you complete your state tax return for Year 1 and determine that you should only have paid $4000 which entitles you to a $1000 refund.

When this happens you are required to add the $1000 refund back to your income in year 2. The net effect is that you only get a deduction for the actual net tax paid of $4000.

Sorry Vince you are not totally correct. That refund has a lot more impact. The refund is included in adjusted gross income----your payment of taxes was an itemized deduction. To the extent that there is a deduction limitation based AGI the refund reduces the amount you can deduct. We don't want to go into its effect on AMT either. If they really wanted it to be an offset it would offset the current years deduction like it does on those people taking the standard deduction.

Mr Salt
2001 540 CPMY
Caterpillar C-12s
Cape May, NJ