Your estimated sales tax for the year is calculated based on your local sales tax rate and your income. If you make a major purchase, such as your new vehicle, that is added in. This is a major break for the taxpayers who live in a state that has no state income tax.
You can deduct either the state income taxes you paid or the calculated sales tax - but you cannot deduct both. Turbo Tax will always deduct the tax amount that gives you the larger deduction.
To enter your sales tax amounts:
- When you are in your return, click on Federal in the left column
- Click on Deductions and Credits
- Scroll to Estimates and Other Taxes Paid
- Click on Show More if needed
- Click on the button beside Sales Tax
- On the next page, you can click on Skip Sales Tax or Continue with Sales Tax
- If you click on Continue with Sales Tax, it is advisable that you click on Easy Guide on the next page.
You will be asked for various information, what your sales tax rate is, whether or not you had any major purchases if you had nontaxable income, etc. (All things that can affect your sales tax deduction).
On the major purchase section you will be asked for Purchase type, Description, Cost before Tax, Sales Tax Paid and the Sales Tax Percent. Vehicles are an exception in that if you paid a different sales tax percentage than your state and local sales tax rate, you can still deduct it. (See the first two screenshots below)
Work your way on through. You will be given a comparison of income tax deduction vs. sales tax deduction and can actually choose to take the lesser amount. (See the third screenshot below)
