The IRS recently explained the tax treatment of state and local tax refunds arising from any year in which the new limit on the state and local tax (SALT) deduction is in effect.
In Revenue Ruling 2019-11, the IRS provided four examples illustrating how the long-standing tax benefit rule interacts with the new SALT limit to determine the portion of any state or local tax refund that must be included on the taxpayer’s federal income tax return.
The ruling has no impact on state or local tax refunds received in 2018 and reportable on 2018 returns being filed this tax season.