Federal Income Tax Deduction for Sales Tax

One of the itemized deductions you can claim on Schedule A of Form 1040 when you file your federal income tax return is for state and local income taxes. But you have the option of claiming a deduction for state and local sales taxes instead of income taxes.

Who Can Claim the Deduction

Any taxpayer who itemizes deductions and who is subject to a state and/or local sales tax has the option of claiming a deduction for the sales tax. This deduction is claimed instead of the deduction for state and local income taxes. You cannot claim both deductions.

How is the Amount of the Deduction Calculated

You can save the receipts for all your purchases during the year and add up the sales tax on those purchases, or you can use the tables provided by the Internal Revenue Service (IRS).

Actual Expenses

You can claim a deduction for sales taxes actually paid during the year if the tax rate was the same as the general sales tax rate. Sales taxes on food, clothing, medical supplies, and motor vehicles are deductible even if they are charged at a rate that is lower than the general sales tax rate.

When the sales tax rate on motor vehicles is higher than the general sales tax rate, you can claim a deduction for the amount of tax you would have paid at the general sales tax rate. Motor vehicles include automobiles, motorcycles, mobile homes, recreational vehicles, sport utility vehicles, trucks, vans, and off-road vehicles. You can also claim a deduction for the sales and use tax on leased vehicles.

If you choose the option of claiming the deduction based on sales tax actually paid during the year, you will have to keep all your receipts to support the deduction.

Using the Optional Table

Instead of claiming a deduction based on actual sales tax paid, you can use the optional tables to determine your deduction. These tables are found in the instructions for Schedule A of Form 1040.