In general, an individual taxpayer may elect to deduct state and local general sales taxes in lieu of state and local income taxes, but cannot do both. Also, remember that the 2017 Tax Cuts & Jobs Act that was just passed limits itemized deduction by individuals for state, local, and foreign property taxes, as well as state and local income taxes and general sales taxes paid, to $10,000 ($5,000 for married filing a separate return).
Taxpayers have two options for determining the allowable sales tax deduction amount:
- They can deduct the total amount of general state and local taxes paid by accumulating receipts that show general sales taxes paid, or
- Use optional tables and worksheets available in the instructions for Schedule A (Form 1040).
For more resources, check out PICPA’s Money & Life Tips, Ask a CPA, or CPA Locator.
Answered by: Anthony R. Deutsch, CPA, is a shareholder with Cocannon, Miller & Co. PC in Bethlehem, Pa.