If you itemize your deductions, you can deduct either of the following:
- State and local income taxes you paid; or
- State and local sales taxes you paid.
After you enter information for both of these income and sales taxes amounts, TurboTax will select the one that gives you best tax break.
For most people, the state and local income taxes paid usually gives them the higher deduction, but for others, the sales tax deduction may give them a greater benefit, for example:
- Residents of states that don't collect state and local income tax (Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming)
- Taxpayers who made major purchases during the tax year that were subject to sales tax (we're talking major as in cars, boats, airplanes, RVs, etc.)
- Residents of states with a high sales tax rate. More information
TurboTax will help you calculate the sales tax deduction amount, and will let you know if it results in a deduction higher than your state and local income tax.
How much did I pay in sales taxes last year?
If you fastidiously keep all your sales receipts, you can add up the taxes to get a total. Most people, however, will probably prefer to use the IRS Sales Tax Deduction Calculator.
While you might get a bigger deduction going with the sales tax, particularly if you live in a state with low income taxes, most people will get a better break from their state income taxes. The IRS calculator will let you know for certain.
What is my local sales tax rate?
You can usually find your state's sales tax rate somewhere on your state department of revenue's web site. City and local sales taxes can usually be found by searching online.
Where do I enter my sales taxes paid?
When you use TurboTax to prepare your taxes, we’ll ask you questions about your state sales and income taxes, figure out which tax deduction benefits you the most, and fill in all the right forms for you.
If you've already gone through the step-by-step interview and want to jump directly to the entry screen for sales taxes, follow these directions.
- Select the Federal Taxes tab (the Personal tab in the Home & Business edition).
- Select the Deductions & Credits subtab, select Explore on My Own.
- Scroll down the Deductions & Credits screen until you see the Estimates and Other Taxes Paid group.
- Click on the Start/Update button to the right of the Sales Tax category.
- Follow the prompts.
Where do I enter my state income taxes paid?
Generally, TurboTax collects the necessary state income tax information from you when you enter your W-2 information. However, if you have gone through the step-by-step interview and want to either edit or review the state income tax information, follow these directions.
- Select the Federal Taxes tab (the Personal tab in the Home & Business edition).
- Select the Deductions & Credits subtab, select Explore on My Own.
- Scroll down the Deductions & Credits screen until you see the Estimates and Other Taxes Paid group.
- Click on the Start/Update button to the right of the Other Income Taxes category.
- Scroll down the Estimates and Other Taxes Paid screen until you see the Other Income Taxes Paid in 2012 group.
- Click on the Visit All button to the right of the Other Income Taxes Paid in 2012 group.
- Follow the prompts.
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