Should I Deduct Sales Taxes or State Income Taxes?
If you itemize your deductions, you can deduct either of the following:
- State and local income taxes you paid; or
- State and local sales taxes you paid.
After you enter information for both of these income and sales taxes amounts, TurboTax will select the one that gives you best tax break.
For most people, the state and local income taxes paid usually gives them the higher deduction, but for others, the sales tax deduction may give them a greater benefit, for example:
- Residents of states that don't collect state and local income tax (Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming)
- Taxpayers who made major purchases during the tax year that were subject to sales tax (we're talking major as in cars, boats, airplanes, RVs, etc.)
- Residents of states with a high sales tax rate.
There are also unusual situations where a taxpayer may save more on their state return than they loose on the federal return by choosing the sales tax deduction. TurboTax helps you calculate both tax deductions.
- Schedule A, Itemized Deductions
- Deducting Your Real Estate (Property) Taxes
- What's the difference between "property tax" and "personal property tax"?
- How much did I pay in sales taxes last year?
- Where do I enter my sales taxes paid?