Computation of Recovery Exclusion Worksheet

ProSeries Professional

Computation of Recovery Exclusion

If you are subject to the Alternative Minimum Tax in 2008, claim a deduction for state income taxes paid, and receive a state income tax refund for 2008, use this worksheet to determine if some portion of the state tax refund may be excluded from income on your 2009 Form 1040.

The program will enter the state income tax deduction from line 5 of the Schedule A. If you did not itemize deductions or if you used the state sales tax deduction, the amount will be zero and this worksheet will not apply.

If you have completed your 2008 state income tax return(s), enter the amount of your refund on line 3. You should complete the entire tax return before checking the box on Part I to compute Parts II, III, and IV. If any item of income or deduction changes, you must check the box again to make sure the results of the computation are up-to-date.

The program will show the amount of the computed "recovery exclusion" on Line 4. This portion of your refund is not taxable. If you have entered your state tax refund on line 3, the program will show the taxable amount of the refund on Line 5. This amount will be taxable on your 2009 tax return.