If a taxpayer itemizes deductions, they can choose to deduct state and local income taxes or state and local general sales taxes. If they choose the general sales tax deduction, there are two methods used to calculate the amount they are able to claim. The first method requires the taxpayer to keep receipts for all purchases made during the tax year. The value of the tax on each receipt would be added and input in the tax program under ‘enter sales tax receipts only’. The second method, for taxpayers that do not keep receipts throughout the year, is a general sales tax rate based on the IRS Optional State and Local Sales Tax Tables. Taxpayers can claim the amount of the standard rate plus any state and local tax for major purchases such as motor vehicles, aircraft, boats, homes and materials to build a home.
Taxpayers can deduct either the amount of state and local income tax they paid or the general sales tax rate plus any general sales tax paid on specified items (see the sales tax worksheet, line 7 instructions for a list of specified items). The program will allow values for both to be entered, but will only calculate the deduction based on whichever option is more beneficial to the taxpayer.
For tax years starting after December 31, 2017, the limitation on the deduction for state and local taxes to include general sales tax, real estate tax and personal property tax is $10,000 ($5,000 if married filing separate).
To access the State & Local General Sales Tax Menu – From the Main Menu of the Tax Return (Form 1040) select:
- Itemized Deductions Menu
- Taxes You Paid
- Total State & Local General Sales Taxes
- Select either ‘Use Sales Tax Table Worksheet’ or ‘Enter Sales Tax Receipts Only’.
- Enter Sales Tax Receipts Only – If the taxpayer saved their receipts for their purchases throughout the year, enter the amount of sales taxes that was paid.
- If you choose to use the Sales Tax Table Worksheet, the program will pull the taxpayer’s address and AGI and calculate the general sales tax from the sales tax tables in the Schedule A Instructions.
- If the taxpayer lived in the state the entire year, leave number of days in the state as 0. If the taxpayer lived in more than 1 state during the year, enter the number of days they lived in this state.
- The Local General Sales Tax Percent and the State General Sales Tax Percent will also pull to the menu from the instructions. These fields can be changed if needed. Finally, enter the General Sales Taxes Paid on the Specified Items (see the sales tax worksheet, line 7 instructions for a list of specified items). The program will calculate the deduction for general sales tax.
NOTE: This is a guide on entering General Sales Tax into the Keystone Tax Solutions Pro program. This is not intended as tax advice.
Additional Information: