Sales Tax Deduction

[SC58]

How does TT calculate the sales tax deduction for Schedule A? I used the IRS sales tax calculator for 2022 and the amount was less than TT.  Also, the tables listed is the Schedule A document provided different number. Just want to ensure the TT amount is correct. Total tax for me is 8.3%.  It would also be nice to know the calculation IRS uses to calculate the amount.

[BillM223]

"used the IRS sales tax calculator for 2022" - how did you do this - IRS The Sales Tax Deduction Calculator is not yet ready (see the IRS page). Check the page which appears to say that you would be using the 2021 sales tax calculator.

To know how the IRS calculates sales taxes, you can see the State and Local General Sales Tax Deduction Worksheet—Line 5a in the Schedule A Instructions. 

Does that solve the issue?

[SC58]

Where does it explain the calculation (formula) used to to determine the amount of sales tax that can be deducted?

[BillM223]

To know how the IRS calculates sales taxes, you can see the State and Local General Sales Tax Deduction Worksheet—Line 5a in the Schedule A Instructions.  

Did this not tell you how to determine the amount of sales tax that can be deducted? Or are you asking something else?

[SC58]

Thanks for your responses - I was wondering how IRS determines the amount in the tables - for example

Income Range = 50-60K, 1, Arizona = $634, Arizona Tax = 5.6% . How is the $634 determined?

PS - Turbo Tax is still calculating an amount higher than the Schedule A worksheet? I don't see a place where I can change TT's amount. Or, should I just use the TT calculated amount?

[MaryK4]

The amount of the tax is based on what the "average" person in a similar situation would be expected to spend.  TurboTax and the IRS calculator have local sales tax rate information. This is not contained in the paper instructions.   @SC58 

[SC58]

I saw the IRS Sales Tax Deduction Calculator for 2022  is active; however, the amount calculated by Turbo Tax is substantially higher??? Already filed my return, hope Turbo Tax makes the correction for others who have not filed. 

[BillM223]

I just tested a test return against the IRS Sales Tax Calculator - the results were identical.

There are a number of factors that go into the calculation: state and local tax rate, AGI, non taxable income (like part of Social security that is not taxed), certain large purchases (like automobiles), and so on. At the end of the IRS Sales Tax Calculator is a screen that summarizes what you entered.

Please share with us (if you will) what you entered on the IRS page and the results that you got. Also tell us where you live and did you move during the year?

[SC58]

Single, No dependents, Arizona, Mesa (85207) AGI = $144,755 + untaxed SSN $2,923. IRS Calculator = $1,434; Turbo Tax = $1,542. Difference = $108.

[DawnC]

From the IRS FAQs on the Sales Tax Calculator:  There are two key features of a general sales tax: What is taxed (the tax base), and how much it is taxed (the tax rate). Among states that have local sales taxes, these two features create three basic categories:

1. When the local tax base is the same as the state tax base and there is just one local sales tax rate throughout the state – The local sales tax amount can be included with the state table using a combined rate on the same items.
2. When the local tax base is the same as the state tax base, but the local sales tax rates vary throughout the state - The local sales tax amount can be derived from the state amount using the ratio of the local rate to the state rate.
3. When both the local tax bases and the local sales tax rates vary throughout the state - The local sales tax amount must be derived independently from the state amount.

There are 6 states where the different categories and methodologies will produce different outcomes; Arizona is one of them.   But you can change it in Forms mode.    Click on Forms in the upper right corner and scroll down until you find the Locality Wks (01/01/2022 - 12/31/2022).   Your zip code defaults to box a) Tempe (the highest rate possible), but if you put an X on b) Any other locality that imposes a local sales tax, it should match the IRS calculator.    Option c) provides no locality deduction.   

[SC58]

Atten: BillM223 (Employee Tax Expert) - Did you see the numbers I posted for the Sales Tax Calculator?

[BillM223]

I did see your numbers. Do you have the CD/download version of TurboTax? In Forms mode, can you see what Dawn referred to, Schedule A and Tax & Int Wks and Locality Wks?