How to Include Nontaxable Income to Calculate Your Sales Tax Deduction

Nontaxable disability income and certain other nontaxable income can be reported in TurboTax to increase your sales tax deduction, lowering your overall tax liability. Do not include income you have already reported as taxable income. The following are some examples of nontaxable income you can include for calculating the sales tax deduction:

• Child support
• Worker's compensation
• Military basic quarters and subsistence allowances
• Tax-exempt interest
• Public assistance payments
• Economic recovery payments
• Nontaxable Social Security and Railroad Retirement benefits
• Nontaxable combat pay
• Veteran's disability pay for active service-related disabilities in the military or certain government services
• Veteran's disability pay for combat-related injuries or illness

In TurboTax, include your nontax income for calculating the sales tax deduction by:

1. Select the Federal Taxes tab (Personal tab in Home & Business product.
2. Then choose Deduction & Credits and click on Explore On My Own.
3. Scroll down to Estimates and Other Taxes Paid, and on the Sales Tax line, click the Start/Update button.
4. In the Sales Tax interview, click Continue with Sales Tax and select Easy Guide.
5. Enter your location and sales tax information. When finished, click Done.
6. You should see the Nontaxable Income screen. Click Yes to add your nontaxable income.

In the Nontaxable Income field on the next screen, enter the total amount of all of your nontaxable income. Include only your nontaxable income, as taxable income entered in other areas of TurboTax are already included when calculating the sales tax deduction.