Can I Claim State Sales Tax Deduction if I Do Not Pay State Income Tax?

Maximize deduction of sales tax instead of state income tax by following IRS rules.

Maximize deduction of sales tax instead of state income tax by following IRS rules.

When you have enough itemized tax deductions to exceed the standard deduction, a whole new world of tax advantages is possible. Your federal tax is lowered with each additional itemized deduction. According to the IRS, "You can elect to deduct state and local general sales taxes instead of state and local income taxes. You cannot deduct both." If you live in a state with no income tax, therefore, you can deduct sales taxes instead.

Tax Table

Most people use the sales tax tables provided by the Internal Revenue Service to determine their deductions for state and local sales tax. This option doesn't require keeping receipts showing sales tax on purchases. These tables are at the end of the instructions for Schedule A, which is the form listing itemized deductions. The first step in using the sales tax tables is completing the State and Local General Sales Tax Deduction Worksheet on page 4 of the Instructions for Schedule A. You can also use the Sales Tax Deduction Calculator on the IRS website. This determines the income you apply to the tax table for your state.

Specific Items

In addition to the deduction determined from using the sales tax tables, you can add state and local sales tax you paid on certain specified items. An example is sales tax paid on motor vehicles. This includes motorcycles, motor homes, recreational vehicles, sport utility vehicles, and off-road vehicles as well as regular cars and trucks. Sales tax on boat or aircraft purchases adds to the deduction. You can also count home building materials, including sales tax on a mobile home or prefabricated home, as well as any sales tax paid by a contractor for materials used to improve your home. However, you cannot include sales tax paid on items you used in business.

Multiple States

If you lived in more than one state during the year, you must prorate the sales tax deduction for each state. Determine the fraction of the year that you lived in a state. For example, living in one state for 150 days results in a fraction of 150/365. Multiply this figure by the amount of sales tax from the table for that state. Do this for every state where you lived. Totaling the states gives you a deduction for the entire year. If one state has no sales tax, the amount for your period living there is zero. You’re not allowed to combine income tax in one state with sales tax in another state.

Actual Receipts

Instead of using the standard table to identify your sales tax deduction, you’re entitled to deduct the actual sales tax paid according to your records. Keeping just a few receipts for expensive purchases might total more than the figure from the sales tax table. For instance, people who recently married or moved often incur substantial costs for new furniture and home furnishings. Sales tax for these expenditures alone sometimes exceeds the standard table amount.

About the Author

Brian Huber has been a writer since 1981, primarily composing literature for businesses that convey information to customers, shareholders and lenders. Huber has written about various financial, accounting and tax matters and his published articles have appeared on various websites. He has a Bachelor of Arts in economics from the University of Texas at Austin.

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