A Major, Often Overlooked Tax Deduction
Editor's Note: This article is part of our 2014 Tax Tips series. Robert Flach is an expert with more than 40 years of experience as a tax professional and also blogs as The Wandering Tax Pro.
NEW YORK (MainStreet) Most taxpayers are aware that state and local income taxes are deductible if you itemize on Schedule A. But there is another state payroll tax deduction that is often overlooked.
If you live and/or work in Alaska, California, New Jersey, New York, Pennsylvania, Rhode Island, or Washington your employer withholds mandatory contributions to a state disability, family leave, unemployment and/or supplemental workers' compensation fund from your paycheck. You can deduct these mandatory employee contributions as a tax on Schedule A.
These withholdings are often entered in Box 14, and sometimes Box 19, of your W-2. If not you should find them listed on your paystub.
These employee contributions are considered a form of state income tax. If you elect to deduct state and local sales tax instead of state and local income tax you cannot also deduct these contributions.
In most cases, as is true for New Jersey, there is a statutory maximum contribution for each fund. If you had more than one employer during the year you may have had more than the maximum amount of contributions withheld and could be entitled to a refund of the excess contributions. In New Jersey excess disability, family leave, and/or unemployment withholding is treated as additional state tax withholding on the resident or non-resident income tax return.
--Written by Robert D. Flach for MainStreet