General sales
tax deduction. You can elect
to deduct state and local
general sales taxes instead of
state and local income taxes as
an itemized deduction on
Schedule A (Form 1040).
Reminder
Limit on
itemized deductions. If your
adjusted gross income is more
than $142,700 ($71,350 if you
are married filing separately),
the overall amount of your
itemized deductions may be
limited. See chapter 31 for more
information about this limit.
Introduction
This chapter discusses which
taxes you can deduct if you
itemize deductions on Schedule A
(Form 1040). It also explains
which taxes you can deduct on
other schedules or forms and
which taxes you cannot deduct.
This chapter covers:
Income taxes (state,
local, and foreign),
General sales taxes
(state and local),
Real estate taxes
(state, local, and
foreign),
Personal property
taxes (state and local),
and
Taxes and fees you
cannot deduct.
Use Table 24-1 as a guide to
determine which taxes you can
deduct.
At the end of the chapter is
a section that explains which
form you use to deduct the
different types of taxes.
Business
taxes.
You can deduct certain
taxes only if they are
ordinary and necessary
expenses of your trade or
business or of producing
income. For information on
these taxes, see Publication
535, Business Expenses.
State or
local taxes.
These are taxes imposed by
the 50 states, U.S.
possessions, or any of their
political subdivisions (such
as a county or city), or by
the District of Columbia.
Indian
tribal government.
An Indian tribal
government that is
recognized by the Secretary
of the Treasury as
performing substantial
government functions will be
treated as a state for this
purpose. Income taxes, real
estate taxes, and personal
property taxes imposed by
that Indian tribal
government (or by any of its
subdivisions that are
treated as political
subdivisions of a state) are
deductible.
Foreign
taxes.
These are taxes imposed by
a foreign country or any of
its political subdivisions.
Useful Items - You
may want to see:
Publication
514
Foreign Tax Credit for
Individuals
530
Tax Information for
First-Time Homeowners
Form
(and Instructions)
Schedule A (Form 1040)
Itemized Deductions
Schedule E (Form 1040)
Supplemental Income and
Loss
Form 1116
Foreign Tax Credit
Tests To Deduct Any
Tax
The following two tests must
be met for any tax to be
deductible by you.
The tax must be
imposed on you.
The tax must be paid
during your tax year.
The tax
must be imposed on you.
Generally, you can deduct
only taxes that are imposed
on you.
Generally, you can deduct
property taxes only if you
are the property owner. If
your spouse owns property
and pays real estate taxes
on it, the taxes are
deductible on your spouse's
separate return or on your
joint return.
The tax
must be paid during your tax
year.
If you are a cash basis
taxpayer, you can deduct
only those taxes actually
paid during your tax year.
If you pay your taxes by
check, the day you mail or
deliver the check is the
date of payment, provided
the check is honored by the
financial institution. If
you use a pay-by-phone
account, the date reported
on the statement of the
financial institution
showing when payment was
made is the date of payment.
If you contest a tax
liability and are a cash
basis taxpayer, you can
deduct the tax only in the
year it is actually paid.
If you use an accrual
method of accounting, see
Publication 538, Accounting
Periods and Methods, for
more information.
Income Taxes
This section discusses the
deductibility of state and local
income taxes (including employee
contributions to state benefit
funds) and foreign income taxes.
State and
Local Income
Taxes
You can deduct state and
local income taxes. You can
elect to deduct state and
local general sales taxes
instead of state and local
income taxes.
Exception.
You cannot deduct
state and local income
taxes you pay on income
that is exempt from
federal income tax,
unless the exempt income
is interest income. For
example, you cannot
deduct the part of a
state's income tax that
is on a cost-of-living
allowance that is exempt
from federal income tax.
What To
Deduct
Your deduction may be
for withheld taxes,
estimated tax payments,
or other tax payments as
follows.
Withheld taxes.
You can deduct
state and local
income taxes
withheld from your
salary in the year
they are withheld.
For 2004, these
taxes will be shown
in boxes 17 and 19
of your Form W-2.
You may also have
state or local
income tax withheld
on Form W-2G (box
14), Form 1099-MISC
(box 16), or Form
1099-R (boxes 10 and
13).
Estimated tax
payments.
You can deduct
estimated tax
payments you made
during the year to a
state or local
government. However,
you must have a
reasonable basis for
making the estimated
tax payments. Any
estimated state or
local tax payments
you make that are
not reasonably
determined in good
faith at the time of
payment are not
deductible. For
example, you made an
estimated state
income tax payment.
However, the
estimate of your
state tax liability
shows that you will
get a refund of the
full amount of your
estimated payment.
You had no
reasonable basis to
believe you had any
additional liability
for state income
taxes and you cannot
deduct the estimated
tax payment.
Refund applied to
taxes.
You can deduct any
part of a refund of
prior-year state or
local income taxes
that you chose to
have credited to
your 2004 estimated
state or local
income taxes.
Do not reduce
your deduction by
either of the
following items.
Any
state or
local income
tax refund
(or credit)
you expect
to receive
for 2004.
Any
refund of
(or credit
for) prior
year state
and local
income taxes
you actually
received in
2004.
However, part or all
of this refund (or
credit) may be
taxable. See
Refund (or
credit) of state or
local income taxes,
later.
Separate federal
returns.
If you and your
spouse file separate
state, local, and
federal income tax
returns, you each
can deduct on your
federal return only
the amount of your
own state and local
income tax.
Joint state and
local returns.
If you and your
spouse file joint
state and local
returns and separate
federal returns,
each of you can
deduct on your
separate federal
return part of the
state and local
income taxes. You
can deduct only the
amount of the total
taxes that is
proportionate to
your gross income
compared to the
combined gross
income of you and
your spouse.
However, you cannot
deduct more than the
amount you actually
paid during the
year. You can avoid
this calculation if
you and your spouse
are jointly and
individually liable
for the full amount
of the state and
local income taxes.
If so, you and your
spouse can deduct on
your separate
federal returns the
amount you each
actually paid.
Joint federal
return.
If you file a
joint federal
return, you can
deduct the total of
the state and local
income taxes both of
you paid.
Contributions to
state benefit funds.As an employee,
you can deduct
mandatory
contributions to
state benefit funds
that provide
protection against
loss of wages.
Mandatory payments
made to the
following state
benefit funds are
deductible as state
income taxes on
Schedule A (Form
1040), line 5.
California
Nonoccupational
Disability
Benefit
Fund.
New
Jersey
Nonoccupational
Disability
Benefit
Fund.
New
Jersey
Unemployment
Compensation
Fund.
New York
Nonoccupational
Disability
Benefit
Fund.
Rhode
Island
Temporary
Disability
Benefit
Fund.
Washington
State
Supplemental
Worker's
Compensation
Fund.
West
Virginia
Unemployment
Compensation
Fund.
Employee
contributions to
private or voluntary
disability plans are
not deductible.
Refund (or credit)
of state or local
income taxes.
If you receive a
refund of (or credit
for) state or local
income taxes in a
year after the year
in which you paid
them, you may have
to include the
refund in income on
Form 1040, line 10,
in the year you
receive it. This
includes refunds
resulting from taxes
that were
overwithheld,
applied from a prior
year return, not
figured correctly,
or figured again
because of an
amended return. If
you did not itemize
your deductions in
the previous year,
do not include the
refund in income. If
you deducted the
taxes in the
previous year,
include all or part
of the refund on
Form 1040, line 10,
in the year you
receive the refund.
For a discussion of
how much to include,
see
Recoveries
in chapter 13.
Foreign
Income Taxes
Generally, you can take
either a deduction or a
credit for income taxes
imposed on you by a foreign
country or a U.S.
possession. However, you
cannot take a deduction or
credit for foreign income
taxes paid on income that is
exempt from U.S. tax under
the foreign earned income
exclusion or the foreign
housing exclusion. For
information on these
exclusions, see Publication
54, Tax Guide for U.S.
Citizens and Resident Aliens
Abroad. For information on
the foreign tax credit, see
Publication 514.
General Sales Taxes
You can elect to deduct state
and local general sales taxes,
instead of state and local
income taxes, as an itemized
deduction on Schedule A (Form
1040). You can deduct either
your actual expenses or an
amount figured using the
Optional State Sales Tax Tables
in Publication 600. If you use
the Optional State Sales Tax
Tables, you may be able to add
to the table amount any state
and local general sales tax you
paid on motor vehicles, boats,
and other items specified in
Publication 600. See the
Instructions for Schedule A
(Form 1040) for details.
Real Estate Taxes
Deductible real estate taxes
are any state, local, or foreign
taxes on real property levied
for the general public welfare.
You can deduct these taxes only
if they are based on the
assessed value of the real
property and charged uniformly
against all property under the
jurisdiction of the taxing
authority.
Deductible real estate taxes
generally do not include taxes
charged for local benefits and
improvements that increase the
value of the property. They also
do not include itemized charges
for services (such as trash
collection) to specific property
or people, even if the charge is
paid to the taxing authority.
For more information about taxes
and charges that are not
deductible, see
Real
Estate-Related Items You Cannot
Deduct, later.
Tenant-shareholders in a
cooperative housing
corporation.
Generally, you can deduct
your share of the real
estate taxes the corporation
paid or incurred on the
property. The corporation
should provide you with a
statement showing your share
of the taxes. For more
information, see
Special Rules for
Cooperatives in
Publication 530.
Buyers and
sellers of real estate.
If you bought or sold real
estate during the year, the
real estate taxes must be
divided between the buyer
and the seller.
The buyer and the seller
must divide the real estate
taxes according to the
number of days in the real
property tax year (the
period to which the tax
imposed relates) that each
owned the property. The
seller is treated as paying
the taxes up to, but not
including, the date of sale.
The buyer is treated as
paying the taxes beginning
with the date of sale. This
applies regardless of the
lien dates under local law.
Generally, this information
is included on the
settlement statement
provided at the closing.
If you (the seller)
cannot deduct taxes until
they are paid because you
use the cash method of
accounting, and the buyer of
your property is personally
liable for the tax, you are
considered to have paid your
part of the tax at the time
of the sale. This lets you
deduct the part of the tax
to the date of sale even
though you did not actually
pay it. However, you must
also include the amount of
that tax in the selling
price of the property. The
buyer must include the same
amount in his or her cost of
the property.
You figure your deduction
for taxes on each property
bought or sold during the
real property tax year as
follows.
Worksheet 24-1.
1.
Enter the
total real
estate taxes
for the real
property tax
year
2.
Enter the
number of
days in the
real
property tax
year that
you owned
the property
3.
Divide line
2 by 366
(for regular
years,
divide line
2 by 365)
.
4.
Multiply
line 1 by
line 3. This
is your
deduction.
Enter it on
Schedule A
(Form 1040),
line 6
Note.
Repeat steps
1 through 4
for each
property you
bought or
sold during
the real
property tax
year.
Real
estate taxes for prior
years.
Do not divide delinquent
taxes between the buyer and
seller if the taxes are for
any real property tax year
before the one in which the
property is sold. Even if
the buyer agrees to pay the
delinquent taxes, the buyer
cannot deduct them. The
buyer must add them to the
cost of the property. The
seller can deduct these
taxes paid by the buyer.
However, the seller must
include them in the selling
price.
Examples. The
following examples
illustrate how real estate
taxes are divided between
buyer and seller.
Example 1.
Dennis and Beth
White's real property
tax year for both their
old home and their new
home is the calendar
year, with payment due
August 1. The tax on
their old home, sold on
May 7, was $620. The tax
on their new home,
bought on May 3, was
$732. Dennis and Beth
are considered to have
paid a proportionate
share of the real estate
taxes on the old home
even though they did not
actually pay them to the
taxing authority. On the
other hand, they can
claim only a
proportionate share of
the taxes they paid on
their new property even
though they paid the
entire amount.
Dennis and Beth owned
their old home during
the real property tax
year for 127 days
(January 1 to May 6, the
day before the sale).
They figure their
deduction for taxes on
their old home as
follows.
1.
Enter the
total real
estate taxes
for the real
property tax
year
$620
2.
Enter the
number of
days in the
real
property tax
year that
you owned
the property
127
3.
Divide line
2 by 366
(for regular
years,
divide line
2 by 365)
.347
4.
Multiply
line 1 by
line 3. This
is your
deduction.
Enter it on
Schedule A
(Form 1040),
line 6
$215
Since the buyers of
their old home paid all
of the taxes, Dennis and
Beth also include the
$215 in the selling
price of the old home.
(The buyers add the $215
to their cost of the
home.)
Dennis and Beth owned
their new home during
the real property tax
year for 243 days (May 3
to December 31,
including their date of
purchase). They figure
their deduction for
taxes on their new home
as follows.
1.
Enter the
total real
estate taxes
for the real
property tax
year
$732
2.
Enter the
number of
days in the
real
property tax
year that
you owned
the property
243
3.
Divide line
2 by 366
(for regular
years,
divide line
2 by 365)
.664
4.
Multiply
line 1 by
line 3. This
is your
deduction.
Enter it on
Schedule A
(Form 1040),
line 6
$486
Since Dennis and Beth
paid all of the taxes on
the new home, they add
$246 ($732 paid less
$486 deduction) to their
cost of the new home.
(The sellers add this
$246 to their selling
price and deduct the
$246 as a real estate
tax.)
Dennis and Beth's
real estate tax
deduction for their old
and new homes is the sum
of $215 and $486, or
$701. They will enter
this amount on Schedule
A (Form 1040), line 6.
Example 2.
George and Helen
Brown bought a new home
on May 3, 2004. Their
real property tax year
for the new home is the
calendar year. Real
estate taxes for 2003
were assessed in their
state on January 1,
2004. The taxes became
due on May 31, 2004, and
October 31, 2004.
The Browns agreed to
pay all taxes due after
the date of purchase.
Real estate taxes for
2003 were $680. They
paid $340 on May 31,
2004, and $340 on
October 31, 2004. These
taxes were for the 2003
real property tax year.
The Browns cannot deduct
them since they did not
own the property until
2004. Instead, they must
add $680 to the cost of
their new home.
In January 2005, the
Browns receive their
2004 property tax
statement for $752,
which they will pay in
2005. The Browns owned
their new home during
the 2004 real property
tax year for 243 days
(May 3 to December 31).
They will figure their
2005 deduction for taxes
as follows.
1.
Enter the
total real
estate taxes
for the real
property tax
year
$752
2.
Enter the
number of
days in the
real
property tax
year that
you owned
the property
243
3.
Divide line
2 by 366
(for regular
years,
divide line
2 by 365)
.664
4.
Multiply
line 1 by
line 3. This
is your
deduction.
Claim it on
Schedule A
(Form 1040),
line 6
$499
The remaining $253
($752 paid less $499
deduction) of taxes paid
in 2005, along with the
$680 paid in 2004, is
added to the cost of
their new home.
Because the taxes up
to the date of sale are
considered paid by the
seller on the date of
sale, the seller is
entitled to a 2004 tax
deduction of $933. This
is the sum of the $680
for 2003 and the $253
for the 123 days the
seller owned the home in
2004. The seller must
also include the $933 in
the selling price when
he or she figures the
gain or loss on the
sale. The seller should
contact the Browns in
January 2005 to find out
how much real estate tax
is due for 2004.
Form
1099-S.
For certain sales or
exchanges of real estate,
the person responsible for
closing the sale (generally
the settlement agent)
prepares Form 1099-S,
Proceeds From Real Estate
Transactions, to report
certain information to the
IRS and to the seller of the
property. Box 2 of the form
is for the gross proceeds of
the sale and should include
the portion of the seller's
real estate tax liability
that the buyer will pay
after the date of sale. The
buyer includes these taxes
in the cost basis of the
property, and the seller
both deducts this amount as
a tax paid and includes it
in the sales price of the
property.
For a real estate
transaction that involves a
home, any real estate tax
the seller paid in advance
but that is the liability of
the buyer appears on Form
1099-S, box 5. The buyer
deducts this amount as a
real estate tax, and the
seller reduces his or her
real estate tax deduction
(or includes it in income)
by the same amount. See
Refund (or rebate),
later.
Taxes
placed in escrow.
If your monthly mortgage
payment includes an amount
placed in escrow (put in the
care of a third party) for
real estate taxes, you may
not be able to deduct the
total amount placed in
escrow. You can deduct only
the real estate tax that the
third party actually paid to
the taxing authority. If the
third party does not notify
you of the amount of real
estate tax that was paid for
you, contact the third party
or the taxing authority to
find the proper amount to
show on your return.
Tenants by
the entirety.
If you and your spouse
held property as tenants by
the entirety and you file
separate federal returns,
each of you can deduct only
the taxes each of you paid
on the property.
Divorced
individuals.
If your divorce or
separation agreement states
that you must pay the real
estate taxes for a home
owned by you and your
spouse, part of your
payments may be deductible
as alimony and part as real
estate taxes. See
Taxes and insurance
in chapter 20 for more
information.
Minister's
and military personnel
housing allowances.
If you are a minister or a
member of the uniformed
services and receive a
housing allowance that you
can exclude from income, you
still can deduct all of the
real estate taxes you pay on
your home.
Refund (or
rebate).
If you receive a refund or
rebate in 2004 of real
estate taxes you paid in
2004, you must reduce your
deduction by the amount
refunded to you. If you
receive a refund or rebate
in 2004 of real estate taxes
you deducted in an earlier
year, you generally must
include the refund or rebate
in income in the year you
receive it. However, you
only need to include the
amount of the deduction that
reduced your tax in the
earlier year. For more
information, see
Recoveries in
chapter 13.
If you did not
itemize deductions in the
year you paid the tax, do
not report the refund as
income.
Table 24-1. Which Taxes
Can You Deduct?
You Can
Deduct
You Cannot
Deduct
Income Taxes
State and local
income taxes.
Foreign income
taxes.
Employee
contributions to
state funds
listed
under
Contributions to
state benefit
funds.
One-half of
self-employment
tax paid.
Federal income
taxes.
Employee
contributions to
private or
voluntary
disability
plans.
State and local
general sales
taxes (if you
choose to deduct
state and local
income taxes).
General Sales
Taxes
State and local
general sales
taxes.
State and local
income taxes (if
you choose to
deduct state and
local general
sales taxes).
Real Estate
Taxes
State and local
real estate
taxes.
Foreign real
estate taxes.
Tenant's share
of real estate
taxes paid by
cooperative
housing
corporation.
Taxes for local
benefits (with
exceptions).
Trash and
garbage pickup
fees (with
exceptions).
Rent increase
due to higher
real estate
taxes.
Homeowners
association
charges.
Personal
Property Taxes
State and local
personal
property taxes.
Import duties.
Other Taxes
Taxes that are
expenses of your
trade or
business
or of producing
income.
Taxes on
property
producing rent
or royalty
income.
Occupational
taxes. See
chapter 30.
State and local
sales and use
taxes.
Federal excise
taxes, such as
telephone taxes
(see
Taxes and
Fees You Cannot
Deduct).
Per capita
taxes.
Fees and
Charges
Fees and charges
that are
expenses of your
trade or
business or of
producing
income.
Fees and charges
that are not
expenses of your
trade or
business or of
producing
income, such as
fees for
driver's
licenses, car
inspections,
parking, or
charges for
water bills (see
Taxes and
Fees You Cannot
Deduct).
Fines and
penalties.
Real
Estate-Related
Items You Cannot
Deduct
Payments for the
following items generally
are not deductible as real
estate taxes.
Taxes for local
benefits.
Itemized charges
for services (such
as trash and garbage
pickup fees).
Transfer taxes
(or stamp taxes).
Rent increases
due to higher real
estate taxes.
Homeowners'
association charges.
Taxes
for local benefits.
Deductible real estate
taxes generally do not
include taxes charged
for local benefits and
improvements tending to
increase the value of
your property. These
include assessments for
streets, sidewalks,
water mains, sewer
lines, public parking
facilities, and similar
improvements. You should
increase the basis of
your property by the
amount of the
assessment.
Local benefit taxes
are deductible only if
they are for
maintenance, repair, or
interest charges related
to those benefits. If
only a part of the taxes
is for maintenance,
repair, or interest, you
must be able to show the
amount of that part to
claim the deduction. If
you cannot determine
what part of the tax is
for maintenance, repair,
or interest, none of it
is deductible.
Taxes for local
benefits may be included
in your real estate tax
bill. If your taxing
authority (or mortgage
lender) does not furnish
you a copy of your real
estate tax bill, ask for
it. You should use the
rules above to determine
if the local benefit tax
is deductible.
Itemized charges for
services.
An itemized charge
for services to specific
property or people is
not a tax, even if the
charge is paid to the
taxing authority. For
example, you cannot
deduct the charge as a
real estate tax if it
is:
A unit fee
for the delivery
of a service
(such as a $5
fee charged for
every 1,000
gallons of water
you use),
A periodic
charge for a
residential
service (such as
a $20 per month
or $240 annual
fee charged to
each homeowner
for trash
collection), or
A flat fee
charged for a
single service
provided by your
government (such
as a $30 charge
for mowing your
lawn because it
was allowed to
grow higher than
permitted under
your local
ordinance).
You must look at
your real estate tax
bill to determine if any
nondeductible itemized
charges, such as those
just listed, are
included in the bill. If
your taxing authority
(or mortgage lender)
does not furnish you a
copy of your real estate
tax bill, ask for it.
Exception.
Service charges used
to maintain or improve
services (such as trash
collection or police and
fire protection) are
deductible as real
estate taxes if:
The fees or
charges are
imposed at a
like rate
against all
property in the
taxing
jurisdiction,
The funds
collected are
not earmarked;
instead, they
are commingled
with general
revenue funds,
and
Funds used
to maintain or
improve services
are not limited
to or determined
by the amount of
these fees or
charges
collected.
Transfer taxes (or stamp
taxes).
Transfer taxes and
similar taxes and
charges on the sale of a
personal home are not
deductible. If they are
paid by the seller, they
are expenses of the sale
and reduce the amount
realized on the sale. If
paid by the buyer, they
are included in the cost
basis of the property.
Rent
increase due to higher
real estate taxes.
If your landlord
increases your rent in
the form of a tax
surcharge because of
increased real estate
taxes, you cannot deduct
the increase as taxes.
Homeowners' association
charges.
These charges are not
deductible because they
are imposed by the
homeowners' association,
rather than the state or
local government.
Personal Property
Taxes
Personal property tax is
deductible if it is a state or
local tax that is:
Charged on personal
property,
Based only on the
value of the personal
property, and
Charged on a yearly
basis, even if it is
collected more or less
than once a year.
A tax that meets the above
requirements can be considered
charged on personal property
even if it is for the exercise
of a privilege. For example, a
yearly tax based on value
qualifies as a personal property
tax even if it is called a
registration fee and is for the
privilege of registering motor
vehicles or using them on the
highways.
If the tax is partly based on
value and partly based on other
criteria, it may qualify in
part.
Example.
Your state charges a
yearly motor vehicle
registration tax of 1% of
value plus 50 cents per
hundredweight. You paid $32
based on the value ($1,500)
and weight (3,400 lbs.) of
your car. You can deduct $15
(1% × $1,500) as a personal
property tax because it is
based on the value. The
remaining $17 ($.50 × 34),
based on the weight, is not
deductible.
Taxes and Fees You
Cannot Deduct
Many federal, state, and
local government taxes are not
deductible because they do not
fall within the categories
discussed earlier. Other taxes
and fees, such as federal income
taxes, are not deductible
because the tax law specifically
prohibits a deduction for them.
See Table 24-1.
Taxes and fees that are
generally not deductible include
the following items.
Estate, inheritance,
legacy, or succession
taxes. However,
you can deduct the
estate tax attributable
to income in respect of
a decedent if you, as a
beneficiary, must
include that income in
your gross income. In
that case, deduct the
estate tax as a
miscellaneous deduction
that is not subject to
the
2%-of-adjusted-gross-income
limit. For more
information, see chapter
4.
Federal income taxes.
This includes
taxes withheld from your
pay.
Fines. You cannot
deduct penalties for
violation of any law,
including forfeiture of
related collateral
deposits.
Gift taxes.
License fees. You
cannot deduct license
fees for personal
purposes (such as
marriage, driver's, and
dog license fees).
Per capita taxes.
You cannot deduct state
or local per capita
taxes.
Social security.
This includes social
security, Medicare, or
railroad retirement
taxes withheld from your
pay.
Social security and
other employment taxes
for household workers.
However, the
social security and
other employment taxes
you pay on the wages of
a household worker may
qualify as medical or
child care expenses. For
more information, see
chapters 23 and 34.
Many taxes and fees other
than those listed above are also
nondeductible, unless they are
ordinary and necessary expenses
of a business or income
producing activity. For other
nondeductible items, see
Real
Estate-Related Items You Cannot
Deduct, earlier.
Where To Deduct
You deduct taxes on the
following schedules.
State and
local income taxes.These taxes are deducted
on Schedule A (Form 1040),
line 5, even if your only
source of income is from
business, rents, or
royalties. You must check
box a on line 5. If you
deduct these taxes, you
cannot elect to deduct
general sales taxes.
General
sales tax deduction.These taxes are deducted
on Schedule A (Form 1040),
line 5. If you elect to
deduct these taxes, you
cannot deduct state and
local income taxes. You must
check box b on line 5.
Foreign
income taxes.
Generally, income taxes
you pay to a foreign country
or U.S. possession can be
claimed as an itemized
deduction on Schedule A
(Form 1040), line 8, or as a
credit against your U.S.
income tax on Form 1040,
line 50. To claim the
credit, you may have to
complete and attach Form
1116. For more information,
see chapter 39, the Form
1040 instructions, or
Publication 514.
Real estate
taxes and personal property
taxes.These taxes are deducted
on Schedule A (Form 1040),
lines 6 and 7, unless they
are paid on property used in
your business in which case
they are deducted on
Schedule C or Schedule F
(Form 1040). Taxes on
property that produces rent
or royalty income are
deducted on Schedule E (Form
1040).
Self-employment tax.Deduct one-half of your
self-employment tax on Form
1040, line 30.
Other
taxes.All other deductible
taxes are deducted on
Schedule A (Form 1040), line
8.
