Derek, a cash basis, unmarried taxpayer, had $610 of state income tax withheld during 2018. Also in 2018, Derek paid $50 that was due when he filed his 2017 state income tax return and made estimated payments of $100 towards his 2018 state income tax liability. When Derek files his 2018 Federal income tax return in April 2019, he elects to take the standard deduction, which reduced his taxable income. As a result of overpaying his 2018 state income tax, Derek receives a refund of $435 early in 2019.How much of the $435 will Derek include in his 2019 gross income?

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Asked Apr 10, 2019
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Derek, a cash basis, unmarried taxpayer, had $610 of state income tax withheld during 2018. Also in 2018, Derek paid $50 that was due when he filed his 2017 state income tax return and made estimated payments of $100 towards his 2018 state income tax liability. When Derek files his 2018 Federal income tax return in April 2019, he elects to take the standard deduction, which reduced his taxable income. As a result of overpaying his 2018 state income tax, Derek receives a refund of $435 early in 2019.
How much of the $435 will Derek include in his 2019 gross income?

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Expert Answer

Step 1

Income Tax Expenses:

 

The expenses which are related to the taxable income of the individuals and business entities for an accounting period, and are recognized by them for the purpose of federal government and state government tax are called as income tax expenses

Step 2

Standard deduction:

 

The IRS has introduced the concept of standard deduction that allows tax deductions upto $12,000 for sin...

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