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Adding up sales tax deductions

By Kay Bell ·
Thursday, February 7, 2013
Posted: 5 pm ET

I got an email today from a taxpayer who is more passionate about tax record keeping than I am. Trust me -- and my husband who fears my office might be featured one day on "Hoarders" -- that's saying something.

Let me make this clear. I am not picking on this person, whom we'll call Paul. I'm impressed.

Paul was wondering whether he had to use the Optional State Sales Tax Table for his state that the Internal Revenue Service puts together each year. These tables show the general amount of sales tax a resident pays -- in the states that collect sales taxes -- based on income and number of exemptions claimed. This amount then is claimed as an itemized deduction.

Or, asked Paul, could he claim the actual amount of sales tax he paid last year? He knows this amount because he has around 3,000 receipts for all his 2012 purchases.

Like I said, impressive.

The answer for Paul and any other obsessive-compulsive dedicated sales receipt collectors is sure, you can add up the sales tax on the slips and enter that amount in the taxes paid section of Schedule A.

Remember, you have the option of claiming sales tax paid or income tax paid. You must choose one or the other, preferably the one that gives you the bigger deduction.

The sales tax deduction is perfect for folks in the nine states that don't tax wage income. But choosing to claim sales taxes also might be better if you live in a low income tax state and were a big shopper last year. You make the choice on a yearly basis, so claiming income tax in the past doesn't preclude you from claiming sales taxes this filing season.

I've spent most of my life in a no-income tax state, either my native Texas as well as a few years in Florida. So I, like millions of other taxpayers, was thrilled when the sales tax deduction was continued, thanks to the "fiscal cliff" tax bill, for the 2012 and 2013 tax years.

When it comes to claiming the sales tax deduction, one tax season I did what Paul wants to do. I didn't have nearly as many receipts as he does, but it was a substantial number. And I dug out my adding machine and ran a tape.

Guess what? My total was pretty darn close to the table the IRS put together. But the exercise made me feel better about using the IRS table.

For the 2012 tax year, the IRS says that if two-person Texas families like the hubby and me made between $60,000 and $70,000, we can deduct $842 in sales taxes.

Of course, that's just the state sales tax amount. We'll need to complete a worksheet (or let our tax software do it) to add in the local sales taxes we paid to our city and county.

And if we had bought a big-ticket item, such as a boat or a car, we could add the general sales tax on that special purchase to our tax table amount.

Most people will use the tables. They're easier.

If you're claiming sales taxes this filing season, you can check out the tables in the back of the Schedule A instructions to get an idea of how much the IRS says you can deduct. The agency also has an online sales tax deduction calculator.

But for Paul and other diligent receipt collectors who know precisely how much sales tax they paid last year, great. Use that total if it's more than the IRS table.

Whichever method you use, I hope this deduction pays off big on your taxes.

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January 10, 2014 at 6:50 pm

I purchased two big ticket vehicles in 2013. Am I limited as to the number of big ticket items I can deduct separately?
I reside in Florida. I was once an obsessive compulsive sales tax itemizer, but I have recovered. I found that indeed the tax tables were so close to the actual amount I spent that it made the exercise a waste of time.

February 11, 2013 at 11:11 pm

I travelled around the country and collected a large number of receipts from different states. When reporting these items, do I have to segregate them according to the state where I paid the sales tax? Or can I just lump everything together.