Suppose I have paid $3000 in state income taxes in 2022, but I expect to receive a $1000 refund. I am itemizing deductions on my 2022 federal return, so normally I would deduct $3000, then include the $1000 refund in my 2023 taxable income.
Is there a way that I can choose to deduct only $2000 on my 2022 return, and then not include the $1000 refund in my 2023 taxable income?
This would be beneficial if I will be in a higher tax bracket in 2023 than in 2022.
In case it's relevant, suppose:
I do not expect to itemize deductions for 2023.
I am not hitting the $10000 cap on state tax deductions.
My state general sales tax deduction would be much lower (let's say $500), so it doesn't enter the picture.
I looked through Pub. 525 to try to find an answer. The Recoveries section talks about excluding some or all of a refund if you weren't allowed to deduct the full amount of your state taxes due to the $10000 cap. But it's not clear to me whether the same principle would apply if you could have deducted the full amount but chose not to.