Only State and Local Income Taxes paid in 1999 for calendar year 1999 are deductible on Schedule A of form 1040. Sorry if I am misreading your point; I just wanted to add that State/Local taxes paid in 1999 for taxes due for prior years can be itemized on Sched. A as well. Taxes paid in 2000 for calendar year 1999 are not deductible. In 1999. They can be included in Sched. A in 2000, however. If you know you are going to owe State and Local income taxes, and that you are going to itemize on your Federal 1040, it is in your interest to pay them in full before the end of calendar year 1999 so they can be deducted on your schedule A 1040 deductions. It may be in your interest to accelerate the deduction (i.e., the value of (i) getting the deduction in 1999 but losing the use of the money until it would otherwise be due may exceed (ii) the benefit of using the money until it would otherwise be paid in 2000 coupled with the itemized deduction taken in 2000). The issue is one of the timing of the deduction and not whether you get to take one. However refunds received in 1999 for calendar year 1998 are considered as income for 1999 and must be reported on Form 1040 itself. This depends on whether you itemized in the corresponding year to which the refund relates as well as whether the reduction of the itemized deduction would take your itemized deductions below the standard deduction level or not (as well as some issues relating to the "tax benefit rule" which TMFTaxes has alluded to in recent posts).Hope I am not restating or, worse, confusing the obvious.
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