Norma, who is single and uses the cash method of accounting, lives in a state that imposes an income tax. In April 2017, she files her state income tax return for 2016 and pays an additional $1,000 in state income taxes. During 2017, her withholdings for state income tax purposes amount to $7,400, and she pays estimated state income tax of $700. In April 2018, she files her state income tax return for 2017, claiming a refund of $1,800. Norma receives the refund in August 2018.
a. Assuming that Norma itemized deductions in 2017, how much may she claim as a deduction for state income taxes on her Federal return for calendar year 2017 (filed in April 2018)?
b. Assuming that Norma itemized deductions in 2017 (which totaled $20,000), how will the refund of $1,800 that she received in 2018 be treated for Federal income tax purposes?
c. Assume that Norma itemized deductions in 2017 (which totaled $20,000) and that she elects to have the $1,800 refund applied toward her 2018 state income tax liability. How will the $1,800 be treated for Federal income tax purposes?
d. Assuming that Norma did not itemize deductions in 2017, how will the refund of $1,800 received in 2018 be treated for Federal income tax purposes?