Car Sales Tax Question

[daniloanh]

hello,

I have a question about filling the tubo tax. I use EasyGuide to fill out sales tax deductions. My residency is in the sales tax of $10.5%. I purchased a new vehicle in a nearby city where the tax rate is 10.8%. When I enter a major purchase, my deduction allowed is capped at 10.5% x car price, even though I put in the actual tax. Is there an error here because I believe I should be eligible for the actual tax amount based on the IRS calculator?

[JohnB5677]

No, States and Cities will give a credit up to the amount you would have been taxed in that state or city.

If you live in City 1 (10.5% tax)

And you buy in City 2 (10.8% tax)

You can only get the credit for the City 1 10.5% tax

If you live in City 2 (10.8%)

And buy in City 1 (10.5%)

You will get credit for the full 10.5% paid to City 1

But you will be charged an additional 0.3% tax in city 2.

You always pay the higher of the two.

[daniloanh]

Thank you for the reply. So basically, even though the sales tax I paid on car purchase is on the city 2 (10.8%), for tax purposes, I can deduct the sales tax amount equaling to 10.5% because that's the combined state and local tax rate of where I live?

I am wondering why IRS never reduce my 10.8% into 10.5% when I'm doing their sales tax deduction calculator.

[DaveF1006]

Yes, that is correct. The IRS calculator may not be updated.