Tax Tip 2016: Deduct State Sales Taxes

You might come out ahead on your federal tax return if you do.

Itemizers have the choice between deducting the state income taxes or state sales taxes they paid. Choose whichever saves you the most. So if your state doesn't have an income tax, the sales tax write-off is clearly the way to go on your federal return.

In some cases, even filers who pay state income taxes can come out ahead with the sales tax choice. The IRS has tables showing how much residents of various states can deduct, based on their income and state and local sales tax rates. If you purchased a big-ticket item like a vehicle, boat or plane, you may add the sales tax you paid to the amount shown in the IRS table. There’s also a sales-tax deduction calculator online.

One word of warning: Congress made this tax break “permanent” in 2015, but as lawmakers take up tax reform in 2017 there’s no guarantee it will survive. Still, you’re sure to have the choice for your 2016 return.

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Check out all 23 commonly overlooked tax deductions.

Kevin McCormally
Chief Content Officer, Kiplinger Washington Editors
McCormally retired in 2018 after more than 40 years at Kiplinger. He joined Kiplinger in 1977 as a reporter specializing in taxes, retirement, credit and other personal finance issues. He is the author and editor of many books, helped develop and improve popular tax-preparation software programs, and has written and appeared in several educational videos. In 2005, he was named Editorial Director of The Kiplinger Washington Editors, responsible for overseeing all of our publications and Web site. At the time, Editor in Chief Knight Kiplinger called McCormally "the watchdog of editorial quality, integrity and fairness in all that we do." In 2015, Kevin was named Chief Content Officer and Senior Vice President.