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Recently, Congress decided that a sales tax deduction should be a tax break that you are allotted permanently. However, it’s often forgotten about, and underutilized. As a taxpayer, if you chose to itemize your deductions on a Form 1040, you can do one of two options. You can either:
Deduct state and local income taxes, or;
Deduct state and local sales tax
You can’t deduct both, so you are required to choose.
In states where there is no state income tax, such as Florida, Texas, Washington, Nevada, South Dakota, and Wyoming and Tennessee this deduction can be especially beneficial.
While this tax break is great for residents of the above mentioned states, it doesn’t mean that they are the only ones who can benefit. Taxpayers in other states can sometimes find that the sales tax deduction is more valuable than deducting state income tax.
Calculating sales tax deductions can sometimes become complicated. You can use all your receipts and total the amount of sales tax you paid throughout the year, but if you haven’t saved your receipts, you may still be able to claim the deduction. The IRS has a special Sales Tax Deduction Calculator which can help you determine your deduction amount.