Deduct State and Local Sales Tax: IRS Ninja Tips
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) For 2013 you can still choose to deduct state and local sales tax instead of deducting state and local income tax. If you deduct state and local income tax on Schedule A you cannot also deduct state and local sales tax, and vice versa.
State and local income tax includes the deductible unemployment (SUI), disability (SDI), and/or family leave (FLI) contribution withholding I previously discussed. If you elect to deduct sales tax you cannot also deduct state unemployment, disability, and/or family leave taxes.
You have two options for claiming a sales tax deduction the actual amount paid for the year, from your receipts, or an amount from the IRS Optional State Sales Tax Tables plus the tax paid on the purchase of "big-ticket" items such as a car, motorcycle, truck, van, recreational vehicle, sport utility vehicle, off-road vehicle, boat, airplane, motor home and home; the tax paid on home building materials; and any sales tax paid on the lease of a motor vehicle.
The amount you can deduct if you use the IRS tables is based on your "total available income," your state of residence and the number of exemptions you claim. Your "total available income" includes your Adjusted Gross Income (AGI) plus any nontaxable receipts, such as
Taxpayers who lived in more than one state during the year must pro-rate the amount from the tables for each state by the number of days in the year lived in each state.
You can use the IRS online Sales Tax Deduction Calculator to determine the amount of your deduction.
This deduction is great for residents of states without an income tax and for seniors who do not state income tax due to pension exclusions.
If you deduct sales tax instead of state income tax you will not have to claim your state tax refund as income on your 2014 Form 1040.
This deduction is one of the famous "extenders" that expired on December 31, 2013, and has not yet been renewed by Congress for tax year 2014.
--Written by Robert D. Flach for MainStreet