How to Itemize for State Income Tax Purposes

When itemizing for income taxes instead of using the standard deduction, you must gather evidence of your expenses. If you itemize for federal taxes, then most of your work can be duplicated. Even if you claim the standard deduction for federal taxes, you should consider itemizing for state taxes because many states provide standard deductions that are significantly lower than federal standards.

Instructions

1. Determine if you qualify to itemize. If you live in states like Arizona, Texas, or Florida, you do not have any state income tax. Some states, such as California restrict people from itemizing based on their federal adjusted gross income. Other states like Connecticut, Illinois, and Indiana do not allow itemized tax deductions.

2. Organize documentation of your receipts and expenses, including the amount that you paid in state income taxes through your employment or property taxes. Although you generally do not need to submit detailed evidence, your receipts will help you file accurate returns and support your deductions in the event that you are audited.

3. Explore your state tax authority's website for helpful tips. For example, the Idaho Tax Commission (tax.idaho.gov) published a release in 2009 that explained how state and local property taxes could be deducted for Idahoans who did not itemize.

4. Distinguish federally based deductions that cannot be applied to state taxes. For example, the federal first-time homebuyer credit for 2008 or 2009 cannot transfer to state returns. Determine if you qualify for state-sponsored programs, like an energy efficiency credit that will lower your state tax obligation.

5. Gather relevant forms. Free forms are available through state and local offices. For many state income tax deductions, you must complete a state Schedule A which is available online. You also can find appropriate forms by registering with an online tax preparation company and filing an itemized return electronically.

Tips & Warnings

• Implement a recording system so that you are not scrambling at the last minute to gather receipts and prepare your state taxes.

• Make sure to file before the deadline, which may not be the same as for federal income tax returns.

References

• California Tax Board
• New Restrictions for New York Deductions
• Connecticut State Taxes