To enter your sales taxes
- Click
on Federal Taxes
- Click
on Deductions and Credits
- Click
on I'll Choose What I Work On
- Scroll
down to Estimates and
Other Taxes Paid
- On Sales
Taxes, click the Start or
Update button
The Internal Revenue Service (IRS) permits you to write off
either your state and local income tax or sales taxes when itemizing your
deductions. People who live in a state that does not impose income taxes often
benefit most from this deduction. However, you might also be better off
deducting sales taxes instead of income taxes if you make large purchases
during the year and your total sales tax payments exceed those for state income
tax. You can use either the actual sales taxes you paid or the IRS optional
sales tax tables.
Step 1: See if you are eligible to itemize
deductions
Determine your eligibility to
itemize deductions on Schedule A. The deduction for your sales tax payments is
only available if you are eligible to itemize. To make this determination, add
up all of your expenses that are eligible to be itemized, including your sales
taxes. If the total amount is greater than the standard deduction amount for
your filing status, then you can itemize on Schedule A and claim the sales tax
deduction. If not, then you can still itemize but are probably better off
claiming the standard deduction where you cannot deduct the sales tax.
Step 2: Gather your receipts
Gather all receipts for your
purchases this year. If you decide to calculate the actual sales taxes you paid
during the year, then you must have a receipt for each purchase. Add the sales
tax payments from each receipt.
Step 3: Calculating the deduction
Calculate your deduction using
the optional sales tax tables. At the end of the instructions to the Schedule A
attachment you will find sales tax tables for each state. Find your state and
determine the allowable sales tax deduction for your range of income. Compare
this amount to the actual total you calculate in Step 2. Since you can
calculate your deduction using either method, choose the one that gives you the
larger deduction.
Step 4: Where to report the deduction
Report your sales tax deduction
on Schedule A. In the section entitled "Taxes You Paid" be sure to
check the box indicating your choice to deduct state sales tax instead of state
income tax and enter the amount of your deduction.
TurboTax can help you with
determining your eligibility, calculating the deduction and reporting it on all
the correct forms.
Things You'll Need
Tips
- If you
receive any sales tax refunds during the year, be sure to reduce your
deductible sales tax payments if not using the optional sales tax tables
to calculate your deduction.
- The IRS
allows you to deduct the sales tax you pay when you lease a car even
though it's not ordinarily considered a purchase.
