Is state sales tax deductible on Federal income tax?

Question

I have a few questions about deducting state sales tax on federal income taxes.

1. Is this deduction still allowed - and specifically is it expected to be in place in tax year 2017 and beyond?

2. Are you still allowed to choose between an estimated amount based on your income or the actual amount based on receipts?

3. If you choose the estimated calculation, can you still add tax from major purchases such as cars on top of the estimated amount?

I haven't itemized my federal deductions since 2011 but recently purchased a house and expect to itemize again starting with tax year 2017 and beyond (due to the mortgage interest). I live in Washington state where we don't have state income tax so there's no deduction for income tax, just possibly sales tax.

I basically want to know if it would be a good idea to start saving all my receipts with sales tax starting in January 2017 to possibly boost my federal tax deduction.

Bostonian In MO · Accepted Answer

1.  The state sales tax deduction was made permanent late last year.  Congress has made no indications that they are considering repealing the deduction any time soon. Taxpayers can deduct either state and local income taxes paid or state and local sales and use taxes paid; taxpayer's choice.

2.  Yes, you can either use the safe harbor amount in the Schedule A instructions or the amount that you can prove with receipts.

3.  Yes, if you choose the safe harbor election you can add the tax paid in big ticket items like cars, trucks, RVs, aircraft, boats, etc.

Joe · Answer

Download and read the instructions for F-1040, Schedule A, here:

https://www.irs.gov/pub/irs-pdf/i1040a.pdf

If I recall correctly, you can select to deduct either state income tax, or state sales tax.  Not both.

You'll be making major purchases, so save those receipts.  It's ALWAYS better to have the ability to substantiate your deductions.

Max Hoopla · Answer

You can choose between sales and state income tax.  If you chose sales tax you can take the standard amount or a higher amount that you can document.

Judy · Answer

1.  It is so far.  No way to tell what Congress will do by 2017.   2.  Yes there's still the table alternative.   3.  yes, for a car, boat or plane

tro · Answer

normally included on Sch A, but no where else

Is state sales tax deductible on Federal income tax?

5 Answers