Deductions & credits

You can never use a federal refund to pay a state tax due, so do not expect to pay MO with a refund you may (or may not) get on your federal return.    Sales tax is an itemized deduction, which will have no effect on your federal tax due or federal refund unless you have enough other itemized deductions to exceed your standard deduction.   

SALES TAX

You can enter the sales tax you paid for the car you purchased in 2021 by going to Federal>Deductions and Credits>Estimates and Other Taxes Paid> Sales Tax.  You will be asked if you paid sales tax on a major purchase, and you will be able to enter the sales tax you paid for your new vehicle. 

Sales tax is an itemized deduction. “Major purchases” that you can enter for the sales tax deduction include:

Motor Vehicles (cars, trucks, motor homes, RV’s, sport utility vehicles and off-road vehicles

Aircraft or boats

Mobile homes

Manufactured housing

Building materials for major home improvements

You cannot deduct: furniture, jewelry, home electronics such as TV’s or computers

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STANDARD DEDUCTION

Many taxpayers are surprised because their itemized deductions are not having the same effect as they did on past tax returns.  The new higher standard deduction and the elimination of certain deductions, as well as the cap on state and local taxes have had a major impact since the new tax laws went into effect beginning with 2018 returns.

Your itemized deductions have to be more than your standard deduction before you will see a change in your tax owed or tax refund.  The deductions you enter do not necessarily count “dollar for dollar;” many of them are subject to meeting  tough thresholds—medical expenses, for example, must meet a threshold that is pretty hard to reach. (Only the amount that is MORE than 7.5% of your AGI counts)   The software program uses all the IRS rules that apply to the expenses you enter, and it tells you if you have enough to use your itemized deductions or if using the standard deduction is more advantageous for you.  Under the new tax laws, some deductions have been capped—there is a $10,000 limit to the itemized deductions for state, local, property and sales taxes.

Your standard deduction lowers your taxable income.  It is not a refund.  You will see your standard or itemized deduction amount on line 12a of your 2021 Form 1040.

2021 STANDARD DEDUCTION AMOUNTS

SINGLE $12,550  (65 or older + $1700)

MARRIED FILING SEPARATELY $12,550  (65 or older + $1350)

MARRIED FILING JOINTLY $25,100  (65 or older + $1350 per spouse)

HEAD OF HOUSEHOLD  $18,800  (65 or older +$1700)

Legally Blind + $1350