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State and Local Sales Tax Deduction

Those who itemize deductions on Schedule A have the option of claiming either state and local income taxes or state and local sales taxes. They cannot claim both.

In general, you should consider taking the sales tax deduction if you live in a state with a sales tax and you believe that the sales tax amount will be greater than any state and local income taxes you paid.

If you saved your receipts over the course of the year, you can add up the total amount of sales tax paid and claim that amount. Remember not to include the sales tax amount paid on items you used in your trade or business.

If you did not consistently save your receipts, you can still claim state and local sales taxes by either using the worksheet and general sales tax tables in the Instructions for Schedule A or the IRS’ online Sales Tax Deduction Calculator.

When you let the IRS calculate your sales tax deduction, only three variables determine the size of your deduction: your state’s sales tax rate, the number of exemptions you claim on your return, and your income. The higher these numbers, the higher your sales tax deduction will be.