Norma, who is single and uses the cash method of accounting, lives in a state that imposes an income tax. In April 2018, she files her state income tax return for 2017 and pays an additional $1,000 in state income taxes. During 2018, her with-holdings for state income tax purposes amount to $7,400, and she pays estimated state income tax of $700. In April 2019, she files her state income tax return for 2018, claiming a refund of $1,800. Norma receives the refund in August 2019. Norma has no other state or local tax expenses.
a. Assuming that Norma itemized deductions in 2018, how much may she claim as a deduction for state income taxes on her Federal return for calendar year 2018 (filed in April 2019)?
b. Assuming that Norma itemized deductions in 2018 (which totaled $20,000), how will the refund of $1,800 that she received in 2019 be treated for Federal income tax purposes?
c. Assume that Norma itemized deductions in 2018 (which totaled $20,000) and that she elects to have the $1,800 refund applied toward her 2019 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 2018, how will the refund of $1,800 received in 2019 be treated for Federal income tax purposes?