Make money by having too much state income tax withheld

[Cathy]

[This post discussed the possibility of reducing one's federal tax liability through clever use of state tax prepayment. I decided to delete the post because the information was not as carefully written as my more recent posts and I wouldn't want it to mislead somebody.]

[MooseOutFront]

I like it.  You could lock in a guaranteed rate of return by applying the money to mortgage principal.  Assuming of course you'll have cash to write a check with in 15-16 months when you pay it back.

[ClaycordJCA]

Doesn't one risk being subject to quarterly tax payments in subsequent years because of being under withheld? 

[RWD]

So let's imagine you have $10,000 extra withheld in the final paycheck of 2014 for state income tax.

Your paychecks must be a lot bigger than mine if you've got a spare $10k that you could withhold...

[Undecided]

Regularly, I don't think it's worth it for me, but I've planned to do it for my last year of working, taking the deduction at 35% and then paying 0% on the refund.

[mqtxc]

If you use your income taxes paid to a state as an itemized deduction on your federal return, your state refund for that year will be taxable income on your federal return the following year. It's reported as income on line 10 of the 1040. 

[TerriM]

Just don't do this when CA is issuing IOUs.

[Bob W]

http://rootofgood.com/make-six-figure-income-pay-no-tax/