Home / Articles / Deduction for state and local sales tax benefits some, but not all, taxpayers

Deduction for state and local sales tax benefits some, but not all, taxpayers

January 18, 2017

Share:

The break allowing taxpayers to take an itemized deduction for state and local sales taxes in lieu of state and local income taxes was made “permanent” a little over a year ago. This break can be valuable to those residing in states with no or low income taxes or who purchase major items, such as a car or boat.

Your 2016 tax return

How do you determine whether you can save more by deducting sales tax on your 2016 return? Compare your potential deduction for state and local income tax to your potential deduction for state and local sales tax.

Don’t worry — you don’t have to have receipts documenting all of the sales tax you actually paid during the year to take full advantage of the deduction. Your deduction can be determined by using an IRS sales tax calculator that will base the deduction on your income and the sales tax rates in your locale plus the tax you actually paid on certain major purchases (for which you will need substantiation).

2017 and beyond

If you’re considering making a large purchase in 2017, you shouldn’t necessarily count on the sales tax deduction being available on your 2017 return. When the PATH Act made the break “permanent” in late 2015, that just meant that there’s no scheduled expiration date for it. Congress could pass legislation to eliminate the break (or reduce its benefit) at any time.

Recent Republican proposals have included elimination of many itemized deductions, and the new President has proposed putting a cap on itemized deductions. Which proposals will make it into tax legislation in 2017 and when various provisions will be signed into law and go into effect is still uncertain.

Questions about the sales tax deduction or other breaks that might help you save taxes on your 2016 tax return? Or about the impact of possible tax law changes on your 2017 tax planning? Contact us — we can help you maximize your 2016 savings and effectively plan for 2017.

© 2017

All content provided in this article is for informational purposes only. Matters discussed in this article are subject to change. For up-to-date information on this subject please contact a Clark Schaefer Hackett professional. Clark Schaefer Hackett will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through this site.

Guidance

Related Articles

Article

2 Min Read

Clark Schaefer Hackett Names Kyle Shumate as Chief Marketing Officer

Article

2 Min Read

How the Inflation Reduction Act Is Extending and Expanding Solar Energy Tax Incentives

Article

2 Min Read

Year-End Tax Planning: Act Now to Reduce Your 2022 Tax Bill

Article

2 Min Read

Is Your Business Tracking R&E Expenses in Preparation for New Section 174 Amortization Rules?

Article

2 Min Read

The Inflation Reduction Act Extends Energy Efficiency Building Incentives

Article

2 Min Read

Inflation Reduction Act Expands Valuable R&D Payroll Tax Credit

Get in Touch.

What service are you looking for? We'll match you with an experienced advisor, who will help you find an effective and sustainable solution.
  • Hidden
  • This field is for validation purposes and should be left unchanged.