- Can I Claim My State Income Tax if It Is Not All Paid Yet?
- Is Sales Tax Deductible As an Itemized Deduction?
- Can I Deduct My State Income Tax Withholding & the General Sales Taxes Paid?
- How to Estimate State & Local Taxes for Tax Filing
- Do You Pay State Income Taxes Based on Where You Lived or Where Your Income Was Earned?
- Do You Have to Pay Income Tax to a Nonresidential State?
If you itemize deductions on your federal tax return, under some circumstances you can deduct state sales taxes that you paid. Although the sales tax deduction expired at the end of 2011, many tax experts -- including consultant Tim Hanford, formerly of the House Ways & Means Committee -- believe that it is likely to be renewed for 2012. The sales tax deduction allows you to either claim the amount you actually paid or take a standard deduction based on the sales tax rate in your state.
Income and Sales Taxes
The IRS does not allow the deduction of sales taxes if you also deduct state income taxes. If your state does not have an income tax, or if you choose not to declare it, then you can deduct state and local sales taxes as well as property taxes and vehicle taxes. In order to deduct sales taxes, you have to itemize deductions on Schedule A of Form 1040. You cannot take the standard deduction and also declare sales tax that you paid as a deduction; you must itemize.
If you keep receipts and records of all sales taxes you paid, you may deduct the actual expense. This would include taxes on purchases of taxable items, which vary from one state to the next but usually include discretionary purchases such as cars, electronics, furniture, liquor, tools and other household goods. Some states -- not all -- also tax food and clothing. You do not have to supply the receipts with your tax return, but you need to keep them in a safe place in case of an audit by the IRS.
Optional Standard Deduction
If you don't want to bother with receipts and sales tax record keeping, you can use optional sales tax tables to calculate a standard deduction for state sales tax. The IRS provides these tables at the end of the instructions for Schedule A. The amount of the deduction depends on the state you live in, your income level, and the number of exemptions you're claiming on your return. You must also complete the sales tax worksheet the IRS provides in the same set of instructions.
Even if you use the sales tax tables, you can still deduct additional sales tax you paid on specific items, including a vehicle you purchased or leased, a boat, an airplane, or a house. You cannot deduct any amount paid above the state's general sales tax rate; in other words, if your state taxes vehicle purchases at 8 percent, and imposes a general sales tax of 6 percent, you can only deduct sales tax paid on a car up to 6 percent. You cannot deduct sales taxes paid on purchases for a business or for work.
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