During 2014, Ryan and Stacy had $2,600 withheld from their pay for state income

Question

During 2014, Ryan and Stacy had $2,600 withheld from their pay for state income taxes. They file a joint return for 2014 and claimed the $2,600 taxes withheld as an itemized deduction on their federal tax return. Their itemized deductions total $13,300 on their 2014 tax return. Their 2014 state income tax was only $1,000 and they received a refund of $1,600 when they field their state income tax return in 2015. As a result, what amount should Ryan and Stacy include in their 2015 gross income?

(Points : 5)        $0
       $600
       $900
       $1,000
       $1,600
       $2,600

Explanation / Answer

The total deduction exceeds the standard deduction by only $700 which is the tax benefit that must be included in income ($13,300 - $12,400 = $900)

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