What is the Sales Tax Deduction?

Posted by Kristen on April 7, 2014

The Sales Tax Deduction is a deduction of your local sales taxes, when itemizing.

What is the Sales Tax Deduction?

You are deducting the sales tax that you have paid this tax year on purchases. You can either deduct your state income taxes or your state sales taxes, and you cannot deduct both of these. Use the Sales Tax Deduction if you are itemizing your deductions on Schedule A.

When do I use the Sales Tax Deduction?

Use this Sales Tax Deduction if you are not deducting your state income taxes. There are two main reasons you would use this deduction:

  • If you’re living in state that doesn’t collect income taxes (Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming do not collect income taxes. Tennessee and New Hampshire have a limited income tax and only tax dividend and interest income.), you may benefit most from this type of deduction.
  • Also, even if you live in a state that collects income taxes, if you made large purchases throughout the year with high sales taxes, this may be a good option as well.

More on the Sales Tax Deduction

If you are itemizing your deductions on Schedule A, you will add up your sales taxes. You must have a receipt for each purchase.

Use the Sales Tax Deduction Calculator provided by the IRS.

Sales Tax Deduction Expiring. Unless something changes in the current tax law, 2013 will be the last year that this deduction is available. For 2014 and moving forward, this will not be available.

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