Which deduction should I choose: sales tax or income tax?
Because the IRS lets itemizing taxpayers deduct either state and local sales taxes or state and local income taxes, you should choose the one that gives you the biggest tax break.
For most people, the income tax deduction gives them a bigger deduction. However, you might be better off taking the sales tax deduction if:
- You are a resident of Alaska, Florida, Nevada, South Dakota, Texas, Washington, or Wyoming (these states don't collect income tax); or
- You made a major purchase that you paid sales taxes on; or
- You live in a state with a high combined state and local income tax rate.
We'll automatically select the deduction that works out best for your particular situation, but you can always override our recommendation.