Can I take a tax deduction for state and local tax on my tax return?

There are four types of non-business tax that you can deduct on your tax return:

	State tax, local tax, and foreign income tax;
	Sales tax;
	Real estate tax; and
	Personal property tax.

To be tax deductible on your tax return a tax must be charged to you and you must have paid it during your tax year. Tax may be claimed only as an itemized tax deduction on Form 1040, Schedule A.

Which tax can I deduct on my tax return?

	You CAN deduct the following tax on your tax return	You CANNOT deduct the following tax on your tax return
Income Tax	State and local income tax. Foreign income tax. Employee contributions to state funds listed under State benefit funds.	Federal income tax. Employee contributions to private or voluntary disability plans.
Real Estate Tax	State and local real estate tax. Foreign real estate tax. Tenant's share of real estate tax paid by cooperative housing corporation.	Tax for local benefits. Trash and garbage pickup fees. Rent increase due to higher real estate tax. Homeowners association charges.
Personal Property Tax	State and local personal property tax.
Sales Tax	State and Local sales tax.
Other Tax	Tax that is an expense of your trade or business or producing income. One half of self employment tax paid. Tax on property producing rent or royalty income. Occupational tax.	Many taxes, such as federal excise tax, generally are not deductible. (See IRS Publication 17 for details.)
Fees and Charges		Fees and charges, such as for driver's licenses or water bills, generally are not tax deductible. (See IRS Publication 17 for details.)

State income tax and local income tax

State income tax and local income tax and property tax are federal income tax deductible in the tax year paid on your tax return. Because of the flexibility allowed in many states, it is often possible to choose the tax year in which a tax is paid and a tax deduction is received on your tax return. State and local income tax withheld from your wages during the tax year are tax deductible on your tax return and appear on your Form W-2. The following amounts are also tax deductible on your tax return:

	Any estimated tax you paid to state or local governments during the tax year;
	Any payments you made with last tax year's state tax return or local tax return; and
	Any prior tax year's state income tax or local income tax you paid during the tax year.

You may want to pay the final installment of your current year's state estimated income tax (or pay an additional amount of estimated tax, up to the total expected tax liability) in the current tax year so you can deduct the amount on your tax return this tax year.

Real estate tax

Tax deductible real estate tax is generally any state tax, local tax, or foreign tax on real property. The tax must be charged uniformly against all property and must be based on property value. The tax can be deducted on your tax return. Many states and counties also impose local benefit tax for improvements to property, such as assessments for streets, sidewalks, and sewer lines. These taxes cannot be deducted on your tax return. However, you can increase the cost basis of your property by the amount of the assessment. See IRS Publication 551, Basis of Assets, for more information. Local benefits are tax deductible on your tax return if they are for maintenance or repair, or interest charges related to those benefits.

If a portion of your monthly mortgage payment goes into an escrow account, and periodically the lender pays your real estate tax out of the account to the local government, do not deduct the amount paid into the escrow account on your tax return. Only deduct the amount actually paid out of the escrow account during the tax year to the tax authority on your tax return. The amount paid in tax to the local tax authority should appear on the mortgage interest statement you receive from your lender.

Personal property tax

Tax deductible personal property tax are only those based on the value of personal property such as a boat or car. To be tax deductible on your tax return the tax must be charged to you on a yearly basis, even if it is collected more than once a tax year or less than once a tax year.

Foreign tax

Generally, you can take either a tax deduction or a tax credit for foreign income tax on your tax return. For information regarding the foreign tax credit, refer to Tax Topic 856.

State benefit funds

As an employee, you can deduct on your tax return mandatory contributions to state benefit funds that provide protection against loss of wages.

Generally, you can deduct on your tax return only tax that is imposed on you. Thus, you cannot deduct real estate tax on your tax return that you pay for a parent.

Related tax information about deducting taxes on your tax return

Tax Directory Topics:
Itemized Tax Deductions Directory

IRS publications about deducting tax on your IRS tax return:
For additional information on deductible tax, refer to Tax Topic 503. For more information on non-business deductions for tax, see the Form 1040 instructions

or IRS Publication 17,

Your Federal Income Tax. Please read this IMPORTANT Editor's Note regarding navigating IRS publications with Adobe Acrobat Reader.
IRS publications can also be ordered by calling 1-800-829-3676.

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