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Individual Income Tax Guide

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Taxes You Cannot Deduct

Schedule A, Line 5 – State and Local Taxes: You can either deduct state and local general sales taxes or state and local income taxes, but you cannot deduct both.

State and Local Income Taxes: If you choose to deduct your state and local income taxes, check box a on line 5. The following state and local income taxes are included on this line:

Do not reduce your deduction for state and local taxes by any:

State and Local General Sales Taxes: If you choose to deduct state and local general sales taxes, check box b on line 5. To determine your deduction, you can use add up your actual sales tax expenses or use the optional state sales tax tables and local sales tax tables.

Actual Expenses: Generally, you can deduct the actual state and local general sales taxes (including compensating use taxes) you paid in 2016 if the tax rate was the same as the general sales tax rate. However, sales taxes on food, clothing, medical supplies, and motor vehicles are deductible as a general sales tax even if the tax rate was less than the general sales tax rate. If you paid sales tax on a motor vehicle at a rate higher than the general sales tax rate, you can only deduct the amount of tax that you would have paid if you paid tax at the general sales tax rate on that vehicle. Motor vehicles include cars, motorcycles, motor homes, recreational vehicles, sport utility vehicles, trucks, vans, and off-road vehicles. You should also include any state and local general sales taxes paid for a leased motor vehicle. However, do not include sales taxes paid on items that you used in your trade or business.

NOTE: You can only use this method if you keep the actual receipts that substantiate the general sales taxes you paid.

Refund of general sales taxes:  If you received a refund of state or local general sales taxes in 2016 for amounts paid in 2015, you must reduce your actual 2016 state and local general sales taxes by this amount. If you received a refund of state or local general sales taxes in 2016 for prior year purchases, you should not reduce your 2016 state and local general sales taxes by this amount. But if you deducted your actual state and local general sales taxes in the earlier year and the deduction reduced your tax, you may have to include the refund in income on Form 1040, line 21. See “Recoveries” on page 22 of Publication 525 for details.

Optional Sales Tax Tables: Instead of using your actual expenses, you can determine the amount of your deduction by using the Optional State and Certain Local Sales Tax Table and the Optional Local Sales Tax Tables for Certain Local Jurisdictions at the end of these instructions. You may also be able to add the state and local general sales taxes paid on certain specified items to the amount determined using the tables.

To determine your state and local general sales tax deduction using the tables, complete the State and Local General Sales Tax Deduction Worksheet.

NOTE: If your filing status is married filing separately, both you and your spouse elect to deduct sales taxes, and your spouse elects to use the optional sales tax tables, you also must use the tables to figure your state and local general sales tax deduction.

Schedule A, Line 6 – Real Estate Taxes: If you are a homeowner who received assistance under a State Housing Finance Agency Hardest Hit Fund program or an Emergency Homeowners' Loan program, see page 2 of Publication 530 for the amount you can deduct on this line.

You should include taxes (state, local, or foreign) you paid on real estate you own that was not used for business, but only if:

Publication 530 explains the allowable deductions for homeowners.

Do not include the following amounts on line 6.

If your mortgage payments includes real estate taxes on your home, you can deduct only the amount the mortgage company actually paid to the taxing authority in 2016.

If you sold your home in 2016, any real estate tax charged to the buyer should be shown on your settlement statement and in box 5 of any Form 1099-S you received from the sale. This amount is treated as a refund of real estate taxes. See Refunds and rebates, below. Any real estate taxes you paid at closing should be listed on your settlement statement.

You must look at your real estate tax bill to determine if the total amount billed includes any nondeductible itemized charges, such as those listed earlier. If your taxing authority (or lender) does not provide you a copy of your real estate tax bill, you should request a copy of it.

Refunds and rebates:  If you received a refund or rebate in 2016 of real estate taxes you paid in 2016, you should reduce your deduction by the amount of the refund or rebate. If you received a refund or rebate in 2016 of real estate taxes you paid in a previous year, you should not reduce your deduction by this amount. Instead, if you deducted the real estate taxes in the earlier year and the deduction reduced your tax, include the refund or rebate in income on Form 1040, line 21. See “Recoveries” on page 22 of Publication 525 for details on how to figure the amount to include in income.

Schedule A, Line 7 – Personal Property Taxes: You can deduct the state and local personal property taxes you paid, but only if the taxes were based only on the value of the property taxed and imposed on a yearly basis.

Example: You paid a yearly fee for the registration of your car. Part of the fee was based on the car's value and part was based on its weight. Only the part of the fee that was based on the car's value is deductible.

Schedule A, Line 8 – Other Taxes: If you had any deductible tax not listed on line 5, 6, or 7, list the type and amount of tax, but enter only one total on line 8. Include on this line income tax you paid to a foreign country or U.S. possession.

NOTE: You may want to take a credit for the foreign tax instead of a deduction. See the instructions for Form 1040, line 48, for details.

Table of Contents

Chapter 10 - Schedule A: Taxes Paid

Taxes You Cannot Deduct

Schedule A, Line 5 – State and Local Taxes

Schedule A, Line 6 – Real Estate Taxes

Schedule A, Line 7 – Personal Property Taxes

Schedule A, Line 8 – Other Taxes