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Tax strategies

An overview of deductible taxes


There are certain types of taxes that you can deduct on your tax return if you itemize on Form 1040, Schedule A. To be deductible on your tax return, a tax must be charged to you and you must have paid it during your tax year.

But a word of caution: through 2025, the Tax Cuts and Jobs Act (TCJA) limits itemized deductions for state and local property taxes and personal state and local income taxes (or sales taxes if you choose that option) to a combined total of only $10,000.

Here are some taxes the IRS will allow you to deduct if you itemize:

• State and local income tax. Individuals can deduct state and local income taxes on their federal tax return. These taxes usually are withheld from your wages during the tax year and appear on your Form W-2. Also, any estimated state and local tax payments during the tax year are tax-deductible.

To increase your itemized deductions on your return, consider prepaying estimated state income taxes before the end of the year. Lastly, if you owed any tax on last year’s state and local tax return, those payments are deductible in the current tax year.

• State and local sales tax. If you itemize, you have the option of claiming your state and local sales tax or state and local income tax. Retirees, pensioners and residents of states without a state income tax often opt to deduct sales tax. Optional sales-tax tables included in the Schedule A instructions give taxpayers a sales-tax-deduction amount as an alternative to saving their receipts (actual expenses) throughout the year. Taxpayers use their income level and number of exemptions to find the sales-tax amount for their state. If you purchased a vehicle, boat or airplane, you may add the sales tax you paid on that big-ticket item to the amount shown in the IRS table for your state.

• Real-estate tax. The real-estate or property taxes you pay on your residence can be deducted on your tax return. Make sure to include any town or village tax. A person must have ownership

interest in the property to deduct the payment. This amount often appears on the mortgage-interest statement you receive from your mortgage lender at the end of the year. 

• Property taxes on a second or vacation home are deductible. If you own a timeshare in which you hold a deed of trust, you may write off the portion of the maintenance fee allocated to property taxes. New homebuyers and re-financers should review the settlement pages from their closing statement as additional deductible real-estate taxes are usually listed there.

Some taxes and fees you cannot deduct on Schedule A include federal income taxes, Social Security taxes, homeowner's association fees, estate and inheritance taxes, and service for water, sewer or trash collection.

Refer to IRS Publication 17 for taxes you can or cannot deduct.

Barry Lisak is an IRS enrolled agent specializing in personal and small business taxes for 30 years. Any questions can be directed to him at 516-829-7283, or mrbarrytax@aol.com.


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