To calculate the amount of state and local income taxes which may be deducted as an itemized deduction, state income taxes paid during the year must be reduced by state income tax refunds received during the year.

Question

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State income tax refunds received during the year are not used to reduce the state income taxes paid for the purpose of calculating the itemized deduction; instead, they may be taxable income if they were deducted in a prior year.

To Calculate the Amount of State and Local Income Taxes