Don’t forget local levies when adding up sales tax deduction

February 5, 2015

Tax time is doubly annoying for most U.S. taxpayers. Forty-one states and the District of Columbia collect taxes on wage and salary income, requiring folks to fill out an annual state return in addition to their federal Form 1040.

Some residents of Tennessee and New Hampshire also have to file a state return if they have enough dividend and interest income.

The one tiny silver lining to these income taxes is that they can be claimed as an itemized deduction on the taxpayers' federal returns.

Writing off sales taxes, too: What about us Texans who don't have any state income taxes to claim? The same is true for residents of Alaska, Florida, Nevada, South Dakota, Washington and Wyoming.

We have the option, at least on our 2014 tax year filings, to claim our state sales taxes.

This tax break ended at the end of last year. It's part of the extenders package that was renewed through 2014, meaning we're relying on Congress to extend the state sales tax deduction at least through 2015, if not longer or permanently, but that's for another blog post.

If you live in a state that collects both sales and income taxes, you must choose which taxes to claim. For most folks, that tends to be the income taxes, but not always. So look closely at the numbers.

Adding up local levies: And if you do claim sales taxes as a deduction, don't forget about your local sales tax levies.

An analysis last fall by the Tax Foundation found that of the 45 states collect statewide sales taxes, 38 of them also allow for the collection of local sales taxes.

State+Local Sales Tax Rates Mid-2014_Tax Foundation
Alaska and Montana are among the 38 states where cities and other local jurisdictions can collect sales taxes even though the Last Frontier and Big Sky Country don't have a statewide sales tax. Data limitations prevented the Tax Foundation from including Montana resort area local sales taxes in the study. Joining Alaska and Montana in not levying a state sales tax are Delaware, New Hampshire and Oregon. Click image for a larger view.

The Internal Revenue Service provides sales tables that filers can use to claim their state sales tax deduction. But when it comes to counting your local sales taxes, you — or your tax preparer or tax software — will have to a little more work.

If you prefer paper, use the worksheet in the Schedule A instructions (page A-5) to run the numbers. Or you can figure your deduction by using the sales tax deduction calculator at the IRS website.

The IRS promises that even if your state and local sales tax rates changed during the year because, for example, the rates changed or you moved, its online calculator can handle it.

What about New Hampshire? OK, my fellow tax geeks, I know what you've been wondering since this post began. What about New Hampshire taxpayers?

Without sales or general income taxes, many of these filers are out of federal deduction of taxes luck.

But there's still some tax write-off hope. The "Taxes You Paid" section of Schedule A offers a few other choices.

Taxes You Paid section of Form 1040 Schedule A 2014

There are real estate taxes, those annoying property taxes that most homeowners pay to county or parish tax collectors every year. Since 1999, New Hampshire has imposed a statewide property tax to pay for local education expenditures.

Or maybe some of the investment income that prompted New Hampshire residents to file state tax returns came from foreign accounts. If those international holdings generated taxes paid to another country, that foreign tax could be counted here.

So don't feel too badly about Live Free or Die staters being cheated out of taxes tax deductions.

Today's Daily Tax Tip has more on the various state and local taxes that can be deducted on your federal tax return.

You also might find these items of interest:

Share:

The More Tax Posts tab at the top of this page will take you to, well, more tax posts. You also can search below for a tax topic. 

Latest Posts
The latest Dirty Dozen tax scam list is familiar because too many are still falling for the schemes

March 5, 2026

Tax filing season is also peak time for tax scams. Be on the lookout for…

Read More
Hello Tax Season 2026

Happy New Tax Year! Are you ready to file your 2025 tax return? I know, too early to ask. But Tax Day 2026 will be here before we realize it. The Internal Revenue Service deadline to file and pay any tax we owe is the regular April 15 date this year. It’s also Tax Day for most of the states that collect income taxes from their residents, which is most of the states! If that seems too far away right now, don’t worry. As is the case every tax season, the ol’ blog’s tips and other tax reminders should help all of us meet our state and federal responsibilities. Procrastinators also will want to keep an eye on the countdown clock just below. It tracks how much time we have until April’s Tax Day, just in case we put off our annual tax task until the absolutely final hours and decide we need to instead get an extension request into the IRS by that date. (Note: I’m in the Central Time Zone, so adjust accordingly for where you live.)

Comments
Leave the first comment