Can I Claim State Sales Tax Deduction if I Do Not Pay State Income Tax?

by Tom Streissguth

    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.

    Actual Expenses

    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.

    Additional Items

    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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    About the Author

    Tom Streissguth has authored more than 100 books for the school and library market, including works for the Gale, Enslow, Facts on File and Lerner Publications. He is the founder of The Archive, an independent publisher of historical journalism collections, and holds a Bachelor of Arts from Yale University.

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