Sales Tax Deduction

Momosgirl — Wed, 27 Oct 2021 17:15:12 GMT

I live in Nevada, a state that does not tax earned income and has high sales tax.
At what point does claiming the sales tax deduction become more advantageous than taking the state income tax deduction? Thank you! (This event is a great idea!)

Re: Sales Tax Deduction

xmasbaby0 — Wed, 27 Oct 2021 17:18:51 GMT

Sales tax is an itemized deduction. The sales tax deduction helps you IF you have enough other itemized deductions to exceed your standard deduction. If you do not have enough itemized deductions to exceed your standard deduction then sales tax has no effect at all. For those who live in states without a state income tax, it can help IF you are able to itemize.

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 12 of your 2020 Form 1040.

2020 Standard Deduction Amounts

Single $12,400 (+ $1650 65 or older)

Married Filing Separate $12,400 (+ $1300 if 65 or older)

Married Filing Jointly $24,800 (+ $1300 for each spouse 65 or older)

Head of Household $18,650 (+ $1650 for 65 or older)

topic Re: Sales Tax Deduction in Self employed

Sales Tax Deduction

Re: Sales Tax Deduction