Some AMT Filers Might Benefit from Claiming Sales Tax Deduction

Taxpayers subject to the Alternative Minimum Tax (AMT) who live in certain states, might be able to lower their state tax liability by claiming a sales tax deduction, rather than taking the deduction for state and local income taxes.

This applies in these 12 states:

• Colorado
• Delaware
• Iowa
• Kansas
• Maryland
• Missouri
• Montana
• Nebraska
• New York
• North Dakota
• Utah
• Virginia

How does this work?

If you are subject to AMT, you don't get a tax benefit from deducting state and local income taxes or sales taxes on your federal return. However, the 12 states listed above allow you to deduct sales tax paid on your state return. So choosing to deduct sales tax, rather than state income tax, on your federal return could give you a bigger deduction on your state return.

To claim sales tax on your federal return, follow these steps:

1. Click on the Federal Taxes tab, then Deductions & Credits.
2. Locate the Estimates and Other Taxes Paid section, the click Edit or Start for Sales Tax.
3. On the “Choose How to Determine Your Sales Tax” screen, select either the Let’s Do Common Method (recommended) or Add My Receipts and follow the instructions provided for either section.
4. At the end of this section, you will be shown the allowable deductions both for the state and local income tax and for sales tax, with an option to choose the sales tax deduction.