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Megan C
Megan C, Certified Public Accountant (CPA)
Category: Finance
Satisfied Customers: 16576
Experience:  Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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I am stuck on line 10 of the 1040. We fit into the exception

Customer Question

I am stuck on line 10 of the 1040. We fit into the exception of not being able to use the state and local income taxc worksheet for line 10. Apparently because last year we could not use all of the education credits from last year.
Submitted: 1 year ago.
Category: Finance
Customer: replied 1 year ago.
We were not able to use $180 of the education credits in 2014. We itemized in 2014, and took $3,617 deduction of state income tax. For this year's taxes (2015), on line 10 it asks for taxable refunds of state and local income taxes. It says we cannot use the worksheet to figure what we have to report as income because we couldn't use the full amount of the credits we were entitled to because the credits were more than the tax. It refers us to the "Itemized Deduction Recoveries". I can't make sense of it.
Expert:  Megan C replied 1 year ago.
Thank you for your question - the only thing you need to put in line 10 is any refund of state income tax that you used as a deduction in the previous year. Sounds like in your case, it's 0. Education credits will not be included there as they are not taxable. In all seriousness, use Turbo Tax or something like that - it will ask you questions and fill your form out for you. As long as you don't have a complicated return (lots of investments or self employment income) you should be okay.Please let me know if you need anything additional. If not, please rate positive.
Customer: replied 1 year ago.
No, that is not correct.1040 pg 23 instructions say: ...
"If the refund was for a tax you paid in 2014 and you deducted state and local income taxes on line 5 of your 2014 Schedule A, use the State and Local Income Tax Refund Worksheet in these instructions to see if any of your refund is taxable.
Exception. See Itemized Deduction Recoveries in Pub. 525 instead of using the State and Local Income Tax Refund Worksheet in these instructions if any of the following applies. ....8. You couldn't use the full amount of credits you were entitled to in 2014 because the total credits were more than the amount shown on your 2014 Form 1040, line 47....Our line 14 of the 1040 was $3071. Our line 50 was $3251.Itemized Deduction Recoveries in Pub. 525 states a bunch of stuff I don't understand. That is why I asked for help. If you can explain it clearly to me, and I get a clear answer, I will pay the money.
Customer: replied 1 year ago.
So, hold the conversation. I found the answer. If you want, I can explain it to you.
I assume I will not be charged since we did not get the answer.
Customer: replied 1 year ago.
Please respond clearly about the charges so I know we are all on the same page.
Thank you.