How to Deduct State & Local Income Taxes

You must use form 1040 if you intend to itemize your deductions.

The Internal Revenue Service allows you to deduct the amount you pay in state and local taxes from the income you report when you file your federal income taxes. According to the IRS publication, "1040 Forms & Instructions 2009," The deduction can only be claimed by people who itemize their deductions instead of taking the standard deduction, and it can't be claimed if you intend to deduct your state and local sales taxes. You shouldn't itemize your deductions unless the total value of your itemized deductions exceeds the value of the standard deduction.

Things You'll Need

• Form 1040
• Schedule A

Instructions

1. Calculate the state and local income taxes you paid during the tax year for which you are claiming the deduction. These include money paid as estimated state and local taxes; money withheld from your wages for state and local taxes; and state and local tax payments made during the year for a previous tax year. For example, if you were claiming the deduction for the 2010 tax year, you would include state and local income taxes paid during 2010 for the 2009 tax year.

2. Report the amount you are eligible to deduct on line 5 of Schedule A. This amount will be added to your other itemized deductions and the total will be used to reduce your reported taxable income for the year.

3. Check box 5a, "Income Taxes," to indicate that you are claiming state and local income taxes rather than state and local sales taxes.

References

• IRS: Topic 503 - Deductible Taxes
• IRS: Schedule A Instructions

Resources

• IRS: Schedule A
• IRS: Form 1040