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Can You Deduct Sales Tax from Your Federal Income Tax?

  • Dec 18, 2014 | Gail Cole

 Includes sales tax.


Update 12.9.2015: The federal deduction for state and local sales tax was allowed to expire at the end of 2014. It will remain that way unless Congress passes the tax extenders bill.

Texas has always stood apart from other states. Blame it on a fierce independent streak or on the fact that for 10 brief shining years, the Republic of Texas was an independent sovereign nation. Whatever the cause, residents of Texas and a handful of other states may be able to claim a deduction for state and local sales taxes on their 2014 federal income tax bills.

This is a result of last minute congressional activity. On Tuesday evening, the Senate approved H.R. 5771, which includes the extension of “dozens of expired ‘temporary’ tax breaks for 2014.” President Obama is expected to sign it.

Most of the tax breaks benefit businesses. The following impact individuals:

  • Residents of states with no income tax may deduct sales and use tax paid in lieu of state income taxes (taxes must be itemized). Affects residents of Alaska, Florida, South Dakota, Nevada, Texas, Washington and Wyoming.
  • Teachers may deduct up $250 for classroom supplies purchased out of pocket.
  • A deduction of up to $4,000 in qualified tuition, fees and related expenses for post-secondary education is open to all tax filers.
  • All commuters may reduce their pre-income for commuting costs. Drivers may exclude $250 per month; mass transit users may exclude $130 per month. Parity allows mass transit users to exclude the driver amount of $250.

The tax extensions are only approved for 2014. They will have to be taken up again by federal lawmakers in order for them to be extended through 2015 or made permanent.

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photo credit: StockMonkeys.com via photopin cc

Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.