Weber resides in a state that imposes a tax on income. The following information

Question

Weber resides in a state that imposes a tax on income. The following information relating to Weber's state income taxes is available:

CA State income taxes withheld in 2015 from W2 : $3,000

Refund received in 2015 from 2014 CA tax return: $300

Additional tax paid in 2015 due to an audit of 2013 CA tax return : $ 800

Assuming he elects to deduct state and local income taxes, what amount should Weber use as state and local income taxes in calculating itemized deductions for his 2015 Federal income tax return?

A. $ 2,700

B. $ 3,000

C. $ 3,500

D. $ 3,800

e. None of the above

Explanation / Answer

Income Tax deduction would be for ;

1. The CA income tax withheld for 2015 from W2= $3,000

2. Additional Tax paid in 2015 for 2013 CA Tax return Audit =$800

Total Deduction Available = $ 3,800

So option D is correct.

However, Weber needs to show $300 received in 2015 as refund of 2014 CA Tax return as Income .

The net effect of income Tax paid/refund received would be $3500

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