Hi All,
I generally have a pretty simple tax situation (single, no house, etc) and a well paid career where I've been doing my own taxes via TurboTax for almost 2 decades now where for the most part it's a quick 30 minute affair of just auto importing my W2 and my investment account income documents.
This year I was prompted to not take the standard deduction for the first time in my life as I was doing my federal taxes due to the new increased SALT limits where it nudged me to take the itemized deduction since I had paid ~$19k in state taxes according to my W2. Ok easy enough, the machine can't be wrong I thought...
For some reason I was thinking about this today or maybe I read something about SALT and it made me go and look - sure enough my tax forms claim that $19k as an itemized deduction. The problem I see with this is that the federal sheets were done before state when that itemized deduction was filled in, then the state tax portion occurred and I got about a $3k state tax refund at the end ($16k state tax responsibility for the year) so the logic in my mind says the itemized deduction should have been $16k not $19k but it couldn't have known that until I did the state portion, though you'd think they would add a doublecheck to the numbers after the state portion to account for logic like this.
Net net, I'm concerned that my itemized deduction driven by SALT is "wrong" because it was based on my overpaid state tax W2 value for this year of ~$19k and not the ~$16k it actually ended up being due to the calculated ~$3k state tax refund I received. Logically at least it feels like the software incorrectly overdeducted by about ~$3k but I know logic and tax code don't necessarily go together always.
Anyways - what am I supposed to do? Did I claim the wrong itemized deduction incorrectly? Is the deduction "correct" but now I have to file/track the state refund as income and account for it via some other method later? What should I do if anything? I'm not looking to get the tax man coming after me.