State Sales Tax WRITTEN BY : Bruce McFarland During your itemizing on Schedule A, Line five ask: State and local (check only one box): A □Income taxes, or B □General sales taxes You have to check one or the other, and enter the amount. You must choose between deducting state and local income taxes, or state and local sales taxes. This write-off makes sense for the most part for those who live in states that do not impose an income tax. For most citizens of income-tax states, the income tax deduction usually is a better deal. IRS has tables for residents of states with sales taxes showing how much they can deduct. However, the tables aren’t the ending authority. If you bought a car, boat or even an airplane, you get to add the state sales tax you paid to the amount shown in IRS tables for your state, to the extent the sales tax rate you paid doesn’t exceed the state’s general sales tax rate. The same goes for home building materials you purchased. The IRS has the Sales Tax Deduction Calculator (http://www.irs.gov/individuals/article/0,,id=152421,00.html), a calculator on its Web site to help you figure out the deduction, which varies by state and income level. There is also a worksheet in the instructions for Schedule A on page A-4.
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