The American Jobs Creation Act of 2004 authorized the sales tax deduction as an option for those who itemize deductions, letting them choose between deductions for state and local income taxes or sales taxes. Taxpayers will indicate by a checkbox on line 5 of Schedule A which type of tax they’re claiming.

The tables give taxpayers a sales tax deduction amount as an alternative to saving their receipts throughout the year and tabulating the amount actually paid. Taxpayers use their income level and number of exemptions to find the sales tax amount for their state. The table instructions explain how to add an amount for local sales taxes if appropriate.

Taxpayers also may add to the table amount any sales taxes paid on:

• A motor vehicle, but only up to the amount of tax paid at the general sales tax rate; and
• An aircraft, boat, home (including mobile or prefabricated), or home building materials, if the tax rate is the same as the general sales tax rate.

While this deduction will mainly benefit taxpayers with a state or local sales tax but no income tax – in Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming – it may give a larger deduction to any taxpayer who paid more in sales taxes than income taxes. For example, a person may have bought a new car, boosting the sales tax total, or claimed tax credits, lowering the state income tax paid. 

To report State and Local Sales Tax Paid within our program go to Federal section > Deductions > Enter Myself > Itemized Deductions > Taxes You Paid.  Click on the link to access the Sales Tax Worksheet.

For more informatio on this topic please see the Schedule A Instructions.