What Are State & Local Taxes?

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If a state has income tax, a resident will typically modify the numbers that have been submitted on their federal return to adjust for rules specific to the state. Learn about deductions on Schedule A if a person itemizes their deductions with information from an independent CPA in this free video on state and local taxes.

Part of the Video Series: Tax Help
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Video Transcript

My name is Miranda Chook and I'm a CPA. We're going to be talking about state and local taxes in this segment. Now one aspect of state and local taxes has to do with if you're a state that actually has income tax. For those of your who do, typically what your states will do will modify the numbers that you've submitted on your federal return for rules specific to your state. So start by filling out your federal tax return and then get the instructions for your state return and transfer the numbers from your federal return to your state then calculate the amount of taxes due or your tax refund. Now the amount of time to complete your state return should be much less than it was for your federal return. Another aspect of the state and local taxes has to do if you're talking about state and local sales taxes. Now particularly if you actually itemize deductions on schedule A, you have a choice of deducting state and local income taxes or state and local sales taxes. Now if you're in a state with no income tax, obviously you'll be using the sales tax deduction. But for the rest of you, you might want to consider the income tax deduction. In most cases this will be more advantageous to you and is easier to compute. However if during the year you've made a large purchase like for a car or a significant amount of building materials, you might want to use the IRS' worksheets or the sales tax deduction calculator available at the IRS' website at irs.gov and calculate it both ways to see which deduction may be most advantageous to you. So again, for more information contact the IRS or an experienced financial adviser to see how this meets your specific circumstances.


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