SALT Limitation - Taxable Refunds

[Eamonn McElroy]

Hello BP Nation,

Today the Treasury issued authoritative guidance via Revenue Ruling 2019-11 on the taxability of state and local tax refunds from which a deduction may have been limited due to the $10,000 state and local tax (SALT) cap.

In a nutshell, if you received no income tax benefit for a portion of the refund (up to the entire refund), the applicable portion would not be included in taxable income.  This treatment will be familiar to taxpayers who have been subject to alternative minimum tax (AMT) in the past, received no tax benefit for SALT deductions, and were able to exclude AMT year SALT refunds from taxable income.

I encourage all of you to work with your CPAs to determine correct treatment on your tax returns if you are capped out on SALT for 2018 but are receiving a refund on your state tax return.  (I can assure you this is common)

Happy Friday.

Link to Revenue Ruling 2019-11.

[Ashish Acharya]

Originally posted by @Eamonn McElroy:

Hello BP Nation,

Today the Treasury issued authoritative guidance via Revenue Ruling 2019-11 on the taxability of state and local tax refunds from which a deduction may have been limited due to the $10,000 state and local tax (SALT) cap.

In a nutshell, if you received no income tax benefit for a portion of the refund (up to the entire refund), the applicable portion would not be included in taxable income.  This treatment will be familiar to taxpayers who have been subject to alternative minimum tax (AMT) in the past, received no tax benefit for SALT deductions, and were able to exclude AMT year SALT refunds from taxable income.

I encourage all of you to work with your CPAs to determine correct treatment on your tax returns if you are capped out on SALT for 2018 but are receiving a refund on your state tax return.  (I can assure you this is common)

Happy Friday.

Link to Revenue Ruling 2019-11.

 Thanks for this bud.

To add,  this notice will impact 2019 return. Not 2018 year. 

You might still have refund income 2018 under old rule. This notice relates to next year.