General Sales Tax Deduction

In the event that deductions are itemized by the taxpayer, the taxpayer can elect to either deduct state and local income taxes or state and local general sales taxes. For the general sales tax deduction, two methods may be used in the calculation of the claimable amount. For the first method, the taxpayer is required to have kept receipts for all the purchases made throughout the tax year. The amount of tax on every receipt will be added and entered under ‘enter sales tax receipts only’ in the tax program. The second method is for the taxpayers who never kept all the receipts during the year. For them, a general sales tax rate dependent on the  IRS Optional State and Local Sales Tax Tables  is used. Taxpayers have the ability to claim the standard rate amount added to any state and local tax for the purchases considered major, for instance, motor vehicle, aircraft or boat purchases, home and materials to build a home. 

Taxpayers have the ability to either deduct the state and local income tax amount they paid or the sum of the general sales tax rate and any general sales tax that was paid on certain items. Check out the  sales tax worksheet, line 7 for a list of specified items. The program permits the entering of both amounts but only computes the deduction based on the option from which the taxpayer will benefit the most. 

For tax years post December 2017, deductions made for state and local taxes that include general taxes, real estate tax and personal property tax is limited to $10,000 ($5,000 if married but filing separately). 

To access the State & Local General Sales Tax Menu: 

• Go to the Main Menu of the tax return (Form 1040) 
• From the menu, select the Itemized Deductions Menu 
• Proceed to Taxes You Paid 
• Then to Total State & Local General Sales Taxes 
• Select either Use Sales Tax Table Worksheet or Enter Sales Tax Receipts Only. 
• Enter Sales Tax Receipts Only - In case the taxpayer has their receipts for purchases during the year, enter the sales taxes paid. 
• In case you elect to use the Sales Tax Table Worksheet, the program will pull the address and AGI of the taxpayer and compute the general sales tax from the sales tax tables that are in the Schedule A instructions. 
• In the event that the taxpayer lived within the state for the whole year, the number of days in the state should be left as 0. In the event that they lived in multiple states through the year, enter the number of days for which they were in this state. 
• Both the Local General Sales Tax and State General Sales Tax Percentages are pulled into the menu from the instructions. Should the need arise, these feilds can be changed. Latly, enter the General Sales Taxes Paid on specific items. The program calculates the deduction for general sales tax. 

Additional Information:

IRS Instructions for Schedule A

Tax Topic 503