Can I deduct state and local taxes on my 2019 tax return?
Updated: Jul 9
Did you know that you may be able to deduct local and state taxes on your 2019 tax return? This option is available to taxpayers who choose to itemize deductions on their tax return; if you choose to take the standard deduction, you may not deduct state or local taxes.
If you are eligible to itemize state and local taxes on your return, you may only deduct taxes that were imposed on you and that you have paid during the tax year. This means that you cannot deduct taxes paid on behalf of another individual or taxes paid during years prior to 2019. Your total deduction for combined state and local income, sales and property taxes is limited to $10,000 (or $5,000 if married filing separately).
There are four types of deductible non-business taxes:
State, Local, and Foreign Income Taxes
State & Local General Sales Taxes
State & Local Real Estate Taxes
State & Local Personal Property Taxes
Income & Sales Taxes
You may elect to deduct state and local general sales taxes on your return in lieu of state and local income taxes, but you cannot deduct both.
If you made any estimated payments for local or state taxes, or if you paid for a prior year’s state or local income taxes during 2019, you may also deduct those payment amounts.
If you opt to deduct sales taxes rather than income taxes, you can choose to deduct the actual amount you paid or use the IRS’s online Sales Tax Deduction Calculator to determine your sales tax deduction.
Foreign Income Tax
Depending on your eligibility, you may be able to take either a deduction or a tax credit for foreign income taxes imposed on you abroad. Other foreign taxes, such as value-added taxes, sales taxes, and property taxes, are not usually eligible for a tax credit but may be tax-deductible.
Personal Property Tax
You can only deduct personal property taxes that are based on the value of personal property such as a boat or a car. In addition, only personal property taxes that are charged to you on a yearly basis are eligible for a deduction; transfer taxes associated with the sale of property cannot be deducted.
Real Estate Tax
State and local real estate may be tax-deductible; consult your tax professional.
Don’t forget to contact your local CPA for more guidance this tax season! Subscribe below to stay up to date with our blog, Accounting Demystified.