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What is Tax Benefit Rule: Recovery Implications about?

The tax benefit rule states that if a taxpayer deducted an amount in a prior year that reduced their taxes, any recovery of that deducted amount in the current year must be included in taxable income for the current year. However, if the prior deduction provided no tax benefit, then any recovery is excluded from income. The rule applies to recoveries of itemized deductions as well as tax credits. If a recovery is received for an item for which a tax credit was claimed, the credit must be recomputed and any

Author

Jacen Bonds

Language

EN