topic When claiming the sales tax deduction on major purchases, how do you handle receipts that include local tax in addition to the general tax rate? in Retirement tax questions

When claiming the sales tax deduction on major purchases, how do you handle receipts that include local tax in addition to the general tax rate?

jldaggett — Tue, 04 Jun 2019 20:34:37 GMT

We did a major home renovation and purchased thousands of dollars worth of materials ourselves. Our local home renovation store includes both general (state) tax and local tax rates when calculating the sales tax charged. I understand from IRS guidelines that the deduction only allows general (state) tax to be deducted so do I manually calculate that for all of my receipts?

Which state? AFAIK, local general sales taxes are include...

RBBrittain — Tue, 04 Jun 2019 20:34:39 GMT

Which state? AFAIK, local general sales taxes are included in the sales tax deduction in most states.

We are in Colorado. The IRS language that is so confusing...

jldaggett — Tue, 04 Jun 2019 20:34:40 GMT

We are in Colorado. The IRS language that is so confusing says "Enter any state and local general sales tax paid . . . on major renovation of a home, but only if the tax rate was the same as the general sales tax rate." So if the general sales tax rate is just state tax, then what do we include or can we include any, because our receipts show a combination of state and local tax charged.

The initial part of the IRS language is correct: "Enter a...

RBBrittain — Tue, 04 Jun 2019 20:34:41 GMT

The initial part of the IRS language is correct: "Enter any state and local general sales tax paid..." Just because your locality has an additional sales tax doesn't mean it isn't "general sales tax", as long as it's the ordinary "general sales tax" rate (state & local combined) charged in that locality. What they don't want is special taxes assessed ONLY on home improvements.

Thank you, that clarifies it! There is a lot of informati...

jldaggett — Tue, 04 Jun 2019 20:34:43 GMT

Thank you, that clarifies it! There is a lot of information out there making it sound like the "general tax rate" is state only. But that contradicts the first part of the rule as you say.