What is the State and Local Sales Tax Deduction?

Tax Deductions and Credits

The State and Local Sales Tax Deduction expired in 2011, but was extended thanks to the American Taxpayers Relief Act of  2012.  Consequently, certain taxpayers will still benefit from this important tax deduction.

iStock_000016020303XSmall(1)

What is the state and local sales tax deduction?

Many people are familiar with the fact that state and local tax payments, including real estate tax, property tax, and state income tax are tax deductible.  A few years ago, Congress added sales tax to the list of deductible state and local taxes.  However, it did so with a bit of a hitch: taxpayers must choose between deducting state and local income tax or state and local sales tax-not both.  Taking the State and Local Sales Tax Deduction may be beneficial to you if you live in a state that doesn’t collect state income taxes or if you made large purchases and paid substantial local sales tax.

How do I calculate my state and local sales tax deduction?

To determine your state and local sales tax deduction, you can keep all of your receipts during the year and then, come tax time, add the sales taxes collected on all of them.  Even if you don’t have all of the receipts TurboTax will help you estimate the value of your state and local sales tax.

If you have state income taxes that were withheld from your paycheck or that you paid and state and local sales taxes, TurboTax will automatically select the higher deduction for you, ensuring you keep more money in your pocket.

What else should I consider when thinking about the state and local sales tax deduction?

If you have relatively low income compared to spending or live in a state without an income tax, be sure to deduct your state and local sales tax deduction.  TurboTax will walk you through the necessary questions and help you get this tax deduction if you’re eligible.

Comments (2) Leave your comment

  1. My Federal taxes went from pending to in line. What does in line mean?

    Also if it is just the Federal that is having an issue why Is the State still Pending and has been for 2 weeks

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s