Sales Tax Deductions

Nationwide – Taxpayers are able to deduct state and local sales or use taxes for 2011 if they itemize deductions on their federal income tax return. Deductions include sales or use tax paid on big-ticket items such as cars, recreational vehicles and boats.

Eligible taxpayers can claim the federal deduction in one of two ways: (1) they can keep receipts and claim the actual amount of taxes paid or (2) they can use the tax tables provided by the IRS.

If taxpayers built a new home or improved their home, they may be able to deduct sales tax paid on materials incorporated into the real property improvement. Labor is not taxable.

Eligible taxpayers must have purchased the materials directly from, and paid tax to, the building materials supplier, or worked with a contractor under a separated contract. Lump sum contracts are not eligible for deduction.