ravenside
New Member

Can the $1,846.52 in sales tax for a home improvement in 2019 be added to my sales tax deduction?

 
DoninGA
Level 15
Intuit Approved! This answer has been verified for accuracy by an Intuit expert employee

Deductions & credits

It can if the sales taxes paid for the major purchase is within these guidelines - 

 

You can also claim the state and local sales tax amounts you paid for big-ticket items such as:

  • Motor vehicles (motor homes, recreational vehicles, sport utility vehicles, and off-road vehicles)
  • Aircraft or boats
  • Your home, substantial home addition, or major home renovation if:
    • Your state or locality charges tax on the sale of a home, the cost of a substantial home addition, or the cost of a major home renovation; or
    • You purchased and paid sales tax on the materials to build a home, build a substantial home addition, or perform a major home renovation.

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Deductions & credits

okay how do I get to that section in turbo tax?

BillM223
Expert Alumni

Deductions & credits

Do a Search (upper right) for sales tax and click on the jump-to result. (Mac software users should look for this in the Topic List)

 

Go through the sales tax interview, and eventually you will come to the screen that DoninGA mentions above about the major purchases.

 

This is reported (if not limited) on Schedule A.

 

 

 

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Deductions & credits

In terms of timing for deducting sales tax for home improvement, let's say we signed a contract to build a new sunroom addition at the end of the year and paid a small deposit, do you deduct the sales tax in the year you sign the contract or do you deduct the sales tax in the year the money is paid to the builder or when it is complete?

JohnB5677
Expert Alumni

Deductions & credits

As an individual you would keep your accounts on a "Cash Basis" Cash Basis Definition (investopedia.com).  Therefore, you would claim the sales tax in the year it was paid.

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Hi - sorry I just want to get a clear answer since I had posted this in another thread and got a different answer from @MarilynG1 .

 

https://ttlc.intuit.com/community/tax-credits-deductions/discussion/re-unfortunately-no-you-can-not-...

 

 

DawnC
Employee Tax Expert

Deductions & credits

You can deduct the sales tax (in the year they were paid) on a home renovation or construction if all of these conditions apply:

  • You're itemizing.
  • You're taking the sales tax deduction, as opposed to the state/local income tax deduction.
  • The tax rate is equal to your state's general sales tax rate.
  • You (or your contractor acting as your agent) purchased the building materials and paid the tax.

Related Information:

  1. A home (including a mobile home or prefabricated home) or substantial addition to or major renovation of a home, but only if the tax rate was the same as the general sales tax rate and any of the following applies.
    • Your state or locality imposes a general sales tax directly on the sale of a home or on the cost of a substantial addition or major renovation.
    • You purchased the materials to build a home or substantial addition or to perform a major renovation and paid the sales tax directly.
    • Under your state law, your contractor is considered your agent in the construction of the home or substantial addition or the performance of a major renovation. The contract must state that the contractor is authorized to act in your name and must follow your directions on construction decisions. In this case, you will be considered to have purchased any items subject to a sales tax and to have paid the sales tax directly.    They are deductible in the year they were paid.   If he has not purchased them yet, you don't know how much tax is imposed.    There is no deduction for the deposit you paid.   When the contractor pays the tax, you can claim it.    @el1668 @el1668
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Thanks - I understand what qualifies but my question is on timing of payments. Do I deduct the sales tax of the entire project based on when the contract is signed or when payments are made, assuming that the payments cross two years? The answer above says to take the deduction when cash goes out, but then I got another answer saying to take it entirely when the contract is signed.

DawnC
Employee Tax Expert

Deductions & credits

I expanded the answer above.   The contract must state that the contractor is authorized to act in your name and must follow your directions on construction decisions. In this case, you will be considered to have purchased any items subject to a sales tax and to have paid the sales tax directly.    They are deductible in the year they were paid.   If he has not purchased them yet, you don't know how much tax is imposed.    There is no deduction for the deposit you paid.   When the contractor pays the tax, you can claim it.    @el1668 

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Thank you - sounds like based on when cash goes out of my account.

Deductions & credits

In addition to deducting the sales tax of remodeling materials, can you deduct the sales tax of the labor to install those materials?

JohnB5677
Expert Alumni

Deductions & credits

Just to be clear.  A sales tax for 2019 can only be entered for the 2019 tax return.  There is no carryover allowance for this deduction.  You can deduct the sales tax for the remodeling materials.  However, there should not be any sales tax on the labor portion of the job.

 

If you Itemize your deductions, the sales tax deduction gives you the opportunity to reduce your tax liability.  You can deduct state and local sales taxes or state and local income taxes that they paid in 2021 — but not both together.

 

 Compare what you paid in sales tax for the year to what you paid in the state, local, and foreign income tax for the year. Then deduct the larger of the two amounts.


 

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I understand your reply which confirms the TurboTax guidance.  However, in WA State sales tax, 10-11%, is charged on the remodeling labor - the larger component of remodeling expenses.

 

WA State doesn't have a State Income Tax, so most of our other transactions are taxed.

JohnB5677
Expert Alumni

Deductions & credits

I now understand better.  The 2019 sales tax can still only be applied to the year it was paid (2019).  However, after further review, the Washington State  "Labor Sales Tax" will fit IRS deductibility guidelines.

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