What is a Sales Tax Deduction?
A sales tax deduction is one of the deductions that are often overlooked.
According to Bankrate, the sales tax deduction gives taxpayers the chance to decrease their tax liability when they subtract state and local sales taxes or state and local income taxes that they paid throughout the year — but not both together.
The Tax Cuts and Jobs Act of 2017 limited the state and local tax (SALT) deduction to $10,000, which includes property taxes and income taxes. However, taxpayers can still claim a sales tax deduction for sales tax paid in 2023. Taxpayers have the option to choose between claiming the sales tax deduction or the SALT deduction, whichever is higher.
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According to Hurdlr, if you are thinking about claiming the sales tax deduction, it’s important to remember that you have to choose between deducting your state, local, and foreign income taxes or deducting your state and local general sales taxes. It is not possible to claim deductions for both.
Amount of sales tax deduction you can claim
The amount of sales tax deduction you can claim depends on your state’s sales tax rate, your income level, and your eligible purchases. Taxpayers can use the IRS sales tax deduction calculator to determine the amount they can claim.
For example, suppose you live in a state with a 7% sales tax rate, and your taxable income is $50,000. In that case, you can claim a sales tax deduction of $1,260 if you had $18,000 in eligible purchases.
In conclusion, sales tax deductions can be an excellent way to save on your tax bill. Taxpayers should keep track of their eligible purchases and receipts to ensure they claim the correct amount. Remember to keep in mind that you can only claim the sales tax deduction or the SALT deduction, whichever is higher.
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