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Z is a cash basis single taxpayer who itemizes her deductions. During 2017, Z had $4,000...

Z is a cash basis single taxpayer who itemizes her deductions. During 2017, Z had $4,000 in state income taxes withheld from her paycheck by her employer. She also paid the following estimated state income taxes for 2017: 4/15/17 $800 6/15/17 800 9/15/17 800 1/15/18 800 What is Z’s deduction for state income taxes on her 2017 Federal income tax return, assuming she itemizes? a. $7,200 b. $3,200 c. $4,000 d. $6,000 e. $6,400

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Answer #1

Out of all the estimated state income taxes paid by her, the payment on 1/15/18 would be deductible on her 2018 Federal income tax return. Hence all the payments on 4/15/17, 6/15/17 and 9/15/17 of $800 each will be deductible on her 2017 Federal income tax return amounted to $2,400 ($800*3 payments). Therefore the Z's total deduction for state income taxes on her 2017 Federal income tax return will be sum of state income taxes withheld from her paycheck by her employer and payments allowed to be deductible.

Z's deduction for State income taxes = $4,000+$2,400 = $6,400

Hence the correct option is e) $6,400.

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