New limit! For 2018 through 2025, the Tax Cuts and Jobs Act (TCJA) limits your entire deduction for state and local taxes — including property tax and either income tax or sales tax — to $10,000 ($5,000 if you’re married filing separately). This will have a significant impact on higher-income taxpayers with large state and local income tax and/or property tax bills.
Individuals generally can take an itemized deduction for either state and local income tax or state and local sales tax. For most taxpayers, deducting state and local income taxes will provide more tax savings. But deducting sales tax can be more valuable to taxpayers residing in states with no or low income tax or who purchase a major item, such as a car or boat.
Except for major purchases, you don’t have to keep receipts and track all the sales tax you actually paid during the year. Your deduction can be determined 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 pay on major purchases.
For guidance on income or sales tax, contact Susan R. St. Amour CPA at 315.701.6432 or email@example.com.