SCENARIO :
** Client will be itemizing deductions on Sch. A for 2018 because deductions exceed standard deduction
** Will be receiving a state income tax refund for 2018
** Client is subject to SALT limitation of $10,000
** Clients state and local sales tax plus state and local real estate taxes exceed $10,000
In this situation, the client should elect the sales tax deduction instead of the state income tax deduction thereby avoiding reporting the state refund as income on 2019 federal return . You need to check the box adjacent to line 5 b on Schedule A to elect the sales tax .
I utilize Drake software and they automatically chose the sales tax deduction if the sales tax plus real property taxes exceed $10,000.I am nit sure if other tax software makes this determination.
I have several clients who fit this scenario.