Yes, nontaxable income can be included to figure out the amount of your sales tax deduction.
Here's where to enter it:
- Sign in to your TurboTax account.
- Select Deductions & Credits.
- Select Edit or Pick up where you left off.
- Scroll down to Estimates and Other Taxes Paid. Expand the section by selecting the down arrow.
- Select Start or Revisit to the right of Sales Tax.
- Select Continue, then select Easy Guide.
- Answer the questions about where you lived and the local sales tax rate.
- Answer Yes on the screen titled Nontaxable Income.
- Enter the amount of nontaxable income you had for the year.
- Answer the next few questions. When you get to We've Chosen a Deduction for You, you will see whether your state sales tax or state income tax is more. You can go with the deduction that TurboTax picked for you or check the box to change your deduction.
Even if your sales tax is more than your state income tax, it may not save you any money. Your total State and Local Taxes are limited to $10,000, no matter how much you actually paid, and your total itemized deductions must be more than you Standard Deduction to reduce your taxes.
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