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Deducting State and Local Income or Sales Taxes

Some state and local income taxes as well as general sales taxes can be tax deductible. This includes:

  • state and local taxes withheld from the taxpayer's salary, pension, etc. in the year they were withheld,
  • estimated payments made in the tax year, and
  • the tax paid in the tax year for the previous year's state and local income tax.
Deductible state income taxes

Mandatory payments to the state benefit funds of:

  • CA
  • NJ
  • NY
  • RI,
  • WA
  • WV

are tax deductible as state income taxes.

What can a taxpayer deduct?

A taxpayer can choose to deduct state and local general sales taxes instead of the state and local income taxes. The taxpayer can file Schedule A to deduct either:

  • sales tax, or
  • income taxes
How to deduct sales taxes?

To deduct sales tax, use the actual receipts or optional tables to determine the tax deductible amount. If you use the IRS' table then you will not need to save receipts throughout the tax year.

Are sales taxes paid on motor vehicles and boats tax deductible?

Yes. Sales taxes paid on motor vehicles and boats may be added to the table amount but only up to the amount paid at the general sales tax rate.

Can I deduct both state and local income taxes as well as the sales tax paid?

No. The taxpayer has to choose one or the other to deduct. The taxpayer cannot deduct both the sales tax paid and state and local income taxes.

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