How to Deduct Local Taxes

Deducting local taxes

When filing your federal income tax return, you want to take every possible deduction. For many, this will mean itemizing deductions and filing Schedule A with IRS Form 1040. State and local taxes are potentially a source of valuable deductions. By simply calculating the total amount paid in state and local taxes and entering that amount in the proper section of Schedule A of Form 1040, you may save a great deal of money.

Things You'll Need

• IRS Form 1040
• IRS Form 1040, Schedule A
• Instructions to Form 1040
• Instructions to Form 1040, Schedule A

Instructions

1. Obtain IRS Form 1040 and Schedule A to Form 1040, and the instructions for both. You can pick up these documents from your local library, request them from the Internal Revenue Service, or print them online. You may also fill them out online if you plan to file electronically.

2. Calculate your state and local taxes. These include income taxes, general sales tax, real estate taxes, and taxes paid on personal property. You may choose to deduct your state income taxes, or your general sales tax, not both. If you opt to deduct your general sales tax, you may use the actual amount paid for the year or a standard deduction. You may also deduct the property taxes paid on real estate and personal property.

3. Enter the total amount for each category of state and local taxes on lines 5 through 8 of Schedule A. Now, enter all other deductible expenses you are claiming. Total all the deductions in Schedule A. There may be a limit to your deductions if your income is above a certain amount; review the instructions to Schedule A to determine if this is the case.

4. Enter your total deductions from Schedule A on line 40a of Form 1040. Complete Form 1040 by calculating your taxable income, deductions, credits and total taxes owed. Be certain you sign the return.

5. File your taxes. You may file electronically or by mail.

References

• IRS Form 1040, Schedule A Instructions
• IRS Form 1040, Schedule A