Deducting state income taxes: some questions

[Alley_Dweller]

Oh, by the way, in the year where you report your California state income tax refund as income on your federal return, remember to enter a subtraction on line 10 of California Schedule CA so you don’t pay double state taxes on your refund.

[muldoonthief]

@Alley_Dweller

On the other hand, timing your deductible expenditures so that they fall into a single year is a valid tax strategy known as “bunching.” The idea is to take itemized and standard deductions in alternating years. So, for example, instead of making donations to your favorite charity every year, make a double donation in even numbered years and no donation in odd numbered years. If your real estate tax is due in January, in even numbered years make one payment in January and your next year’s payment in December. Where you have a choice to speed up a payment, make it in the even numbered year.

This would only apply if your itemized deduction total is reasonably close to the standard deduction, wouldn’t it? If you’re in the early years of a big mortgage and pay a good amount in state income taxes, there’s no way to move payments around to get it to be worth taking the standard deduction.

[What_the]

@iamthewalrus_3

Can you pre-pay state income tax like that?

Could I just pre-pay several years at a time, then not take the refund? That seems like an odd loophole.

Applying your refund to a future year still results in a taxable “refund”.

Also… you can itemize and deduct your state sales tax instead of your state income tax if they are higher. In that case the state income tax is not taxable.