As the title says, is state refund a nonbusiness income?

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On Wednesday, August 10, 2022 at 11:17:13 PM UTC-4, Lenny Miller wrote:

As the title says, is state refund a nonbusiness income?

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Need more informaion. A state refund for what?

Ira Smilovitz, EA
Leonia, NJ

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Lenny Miller <[email protected]> wrote:

As the title says, is state refund a nonbusiness income?

Assuming this is a refund of an individual's state income tax...

The taxable portion of the state refund is reported on Form 1040
Schedule 1 Part I Additional Income Line 1 Taxable refunds, credits, or
offsets of state and local income taxes.

There was a lengthy worksheet to make the calculation on page 85 of the
1040 instructions for 2021.

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Adam H. Kerman <[email protected]> wrote:

Lenny Miller <[email protected]> wrote:

As the title says, is state refund a nonbusiness income?

Assuming this is a refund of an individual's state income tax...

The taxable portion of the state refund is reported on Form 1040
Schedule 1 Part I Additional Income Line 1 Taxable refunds, credits, or >offsets of state and local income taxes.

By the way, can I just complain that I can't stand the new 1040 layout introduced during the Trump administration? The old layout was stable
for decades and I'd gotten used to where various type of information was reported. With the new layout, I tend to have to look everything up.
Yes, I realize there is some logic to it but I'd have preferred if they
had just left it alone.

There was a lengthy worksheet to make the calculation on page 85 of the
1040 instructions for 2021.

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On Wed, 10 Aug 2022 23:12:16 EDT, Lenny Miller
<[email protected]> wrote:

As the title says, is state refund a nonbusiness income?

Are you asking specifically whether a state income tax
refund is included in nonbusiness income on line 7 of
Worksheet 1 in Pub. 536 for calculating a net operating
loss? You recently asked another question about using
Worksheet 1 to calculate a net operating loss.

"Nonbusiness income" might have different meanings in
different contexts.

Bob Sandler

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On 8/11/2022 1:29 PM, Bob Sandler wrote:

On Wed, 10 Aug 2022 23:12:16 EDT, Lenny Miller
<[email protected]> wrote:

As the title says, is state refund a nonbusiness income?

Are you asking specifically whether a state income tax
refund is included in nonbusiness income on line 7 of
Worksheet 1 in Pub. 536 for calculating a net operating
loss? You recently asked another question about using
Worksheet 1 to calculate a net operating loss.

"Nonbusiness income" might have different meanings in
different contexts.

Bob Sandler

Yes, on line 7 of worksheet 1 in publication 536. I would like to know
if state income refund should be included there.

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Lenny Miller <[email protected]> wrote:

Bob Sandler wrote:

Lenny Miller> <[email protected]> wrote:

As the title says, is state refund a nonbusiness income?

Are you asking specifically whether a state income tax
refund is included in nonbusiness income on line 7 of
Worksheet 1 in Pub. 536 for calculating a net operating
loss? You recently asked another question about using
Worksheet 1 to calculate a net operating loss.

"Nonbusiness income" might have different meanings in
different contexts.

Bob Sandler

Yes, on line 7 of worksheet 1 in publication 536. I would like to
know if state income refund should be included there.

Were those taxes deducted from your taxes in the year they were paid?
I'd think that if you received money that you had deducted earlier,
it would be taxable. But if you didn't deduct it, it should not be
taxable.

--
Stu
http://DownToEarthLawyer.com

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Lenny Miller <[email protected]> wrote:

On 8/11/2022 1:29 PM, Bob Sandler wrote:

On Wed, 10 Aug 2022 23:12:16 EDT, Lenny Miller <[email protected]> wrote:

As the title says, is state refund a nonbusiness income?

Are you asking specifically whether a state income tax
refund is included in nonbusiness income on line 7 of
Worksheet 1 in Pub. 536 for calculating a net operating
loss? You recently asked another question about using
Worksheet 1 to calculate a net operating loss.

"Nonbusiness income" might have different meanings in
different contexts.

Yes, on line 7 of worksheet 1 in publication 536. I would like to know
if state income refund should be included there.

Please read How To Figure an NOL Nonbusiness deductions (line 6). This
is on page 3.

Do not enter business deductions on line 6. These are deductions
that are connected to your trade or business. They include the
following.

State income tax on income from your trade or business
(including wages, salary, and unemployment compensation).

But as a sole proprietor, you weren't allowed to deduct the portion of
state and local taxes on net profit from your business (and thus reduce
federal self-employment tax) paid during 2020 anyway. The deduction,
limited to $10,000, is taken on Schedule A Line 5 if you itemize, and
the tax isn't apportioned between net profit from business and
nonbusiness income.

As the state and local income tax payments made during 2020 weren't a nonbusiness deduction in 2020, then the refund of the overpayment received
in 2021 isn't nonbusiness income.

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<< The foregoing was not intended or written to be used, >>
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