You can elect to deduct state and local GENERAL SALES TAXES instead of state and local INCOME TAXES as an itemized deduction on Schedule A (Form 1040). You cannot deduct both. To figure your state and local general sales tax deduction, you can use either your actual expenses or the state sales tax tables.

Actual Amount
This will allow you to enter the actual sales tax amounts you paid during the tax year. You will need to keep all receipts for verification purposes.

Table Amount
This allows you to enter the information and use a standard tax (percentage) rate. You may also be able to add the state and local general sales taxes paid on certain specified items, such as motor vehicles (purchased or leased), aircraft, boats, homes (including mobile and prefabricated homes), and home building materials.

TaxACT will use the higher of state and local income taxes, or state and local general sales taxes to report on Line 5 of Schedule A.

Remember, state wages and withholding will be entered on the Form W-2 and will flow to the Federal Schedule A and the approriate State form (which only applies if your state has an income tax).

To enter Sales Tax (either Actual or Table Amount) in the TaxACT program:

  1. From within your TaxACT return (Online or Desktop), click on the Federal Q&A tab
  2. Click Itemized or Standard Deductions to expand the category and then click Taxes Paid
  3. On the screen titled Itemized Deductions - State and Local Sales Taxes, click Continue
  4. On the screen titled Itemized Deductions - Optional State Sales Tax, click Yes
  5. The program will proceed with the interview questions for you to enter or review the appropriate information.

Your deduction may be limited. See Reduction of Itemized Deductions for more information.

 

Please note: This deduction is set to expire at the end of 2013.

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