What is the State and Local Sales Tax Deduction?

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.


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.

Michael Rubin

Author of the bestseller Beyond Paycheck to Paycheck, and the upcoming The Savings Solution, Michael B. Rubin is a Certified Public Accountant (CPA) and a CERTIFIED FINANCIAL PLANNER professional. In addition to his experience providing sophisticated financial advice to affluent clients, Michael has been a key source of information for over a decade to countless others. He speaks passionately about and provides guidance on virtually all personal financial planning topics. Michael has appeared in various media, including radio and TV stations across the country, plus national media such as CNN Money.com, latimes.com, The Wall Street Journal, SmartMoney.com, Chicago Tribune, Financial Advisor Magazine, and Investment News. Prior to founding Total Candor LLC, Michael worked in the personal financial services practices of two of the former "Big Six" accounting firms. Subsequently working for several years as a new venture executive for Toys "R" Us, Inc., he made sure that he never actually grew up. He holds an undergraduate business degree from the Ross School of Business at the University of Michigan and an MBA from the Kellogg School of Management at Northwestern University. Michael lives in New Hampshire with his wife and children.

Comments (1) 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

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