, Answering FAQ'sTurboTax Employee
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.
How much did I pay in sales taxes last year?
If you fastidiously keep all your sales receipts, you can add up the taxes to get a total. Most people, however, will probably prefer to use the IRS Sales Tax Deduction Calculator.
While you might get a bigger deduction going with the sales tax, particularly if you live in a state with low income taxes, most people will get a better break from their state income taxes. The IRS calculator will let you know for certain.
What is my local sales tax rate? You can usually find your state's sales tax rate somewhere on your state department of revenue's web site. City and local sales taxes can usually be found by searching online.
Where do I enter my sales taxes paid?
When you entered your income in TurboTax, we asked you questions about your income taxes. Use these steps to enter your sales tax information to compare which tax deduction will give you the biggest deduction.
If you've already gone through the step-by-step interview and want to jump directly to the entry screen for sales taxes, follow these steps.
- Select Federal Taxes (Personal in the Home & Business edition).
In Online TurboTax, click the bars at the upper left corner to show Federal Taxes on the selection list; enlarge the screen if needed to show the left side selection list.
- Select Deductions & Credits, and in the next screen, click I'll choose what I work on.
- Scroll down the Your Deductions & Credits screen until you see the Estimates and Other Taxes Paid group.
- Click on the Start/Update button to the right of the Sales Tax topic.
- Choose EasyGuide or Enter All My Receipts, and follow the prompts.
You'll come to the We've Chosen a Deduction for You screen. This shows the biggest deduction option for most taxpayers. However, you can choose to change the recommended deduction by checking the box next to "Change your deduction," and choosing one of the options.
- Schedule A, Itemized Deductions
- Deducting Your Real Estate (Property) Taxes
- What's the difference between "property tax" and "personal property tax"?