Tax Tips & Calculators |
Tax Tip
Overview
- Most states require you to pay income taxes.
- You can deduct state and local income taxes paid, but you must claim the deduction in the year you paid the taxes.
Most states require you to pay personal income tax. Each state has different tax laws. If you live in one state and work in another, you may have to file a state return in both states. Select your state from the drop–down menu or the map below to find out more information about your state's tax laws.
The following states do not have an income tax: Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming. New Hampshire taxes only interest and dividend income, and income from an unincorporated business, rental or farm activity. Tennessee taxes interest and dividend income only.
Select your state from the drop–down menu or the map below to find out more information about your state's tax laws.
If you make estimated income tax payments, mailing the fourth-quarter installment by Dec. 31 earns you the deduction in the current year — even if part of the payment is returned to you via a state tax refund the following spring. However, the payment has to be based on a reasonable estimate of your actual state tax bill. You can't inflate your fourth-quarter payment to increase the write-off on your federal return.
You may have similar flexibility with state and local property tax bills. In some areas of the country, these bills are mailed out in the fall, but they don't have to be paid until January of the following year. Beating the deadline by paying before year-end lets you claim the tax savings a year earlier.
If you are subject to the Alternative Minimum Tax (AMT), prepaying taxes may result in no tax advantage. If you are subject to the AMT, contact a tax professional to help you determine the best time to pay your taxes.
If you choose to deduct income tax, include your withholding and estimated tax payments for the current year as well as any balance due from a prior year. If you credited an overpayment from last year's return to this year's estimated tax payment, be sure to include that amount too.
If you choose to deduct sales tax, you can deduct either the actual amount you paid or the amount from the table in the Schedule A instructions.
If you're subject to the AMT and have a state tax refund, you may benefit from claiming the sales tax deduction even if that deduction is lower than the deduction for state income tax. The reason is that the state income tax refund isn't taxable if you claim the sales tax deduction. Be sure to prepare your return both ways.
Use the IRS Sales Tax Deduction Calculator to see if your sales tax deduction is more beneficial.
The following states do not have an income tax: Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming. New Hampshire taxes only interest and dividend income, and income from an unincorporated business, rental or farm activity. Tennessee taxes interest and dividend income only.
Select your state from the drop–down menu or the map below to find out more information about your state's tax laws.
If you make estimated income tax payments, mailing the fourth-quarter installment by Dec. 31 earns you the deduction in the current year — even if part of the payment is returned to you via a state tax refund the following spring. However, the payment has to be based on a reasonable estimate of your actual state tax bill. You can't inflate your fourth-quarter payment to increase the write-off on your federal return.
You may have similar flexibility with state and local property tax bills. In some areas of the country, these bills are mailed out in the fall, but they don't have to be paid until January of the following year. Beating the deadline by paying before year-end lets you claim the tax savings a year earlier.
If you are subject to the Alternative Minimum Tax (AMT), prepaying taxes may result in no tax advantage. If you are subject to the AMT, contact a tax professional to help you determine the best time to pay your taxes.
Itemized Deductions
If you itemize, you have the option of claiming your state and local sales tax or state and local income tax for the year. Be sure to determine which amount will be larger, because you can't claim both.If you choose to deduct income tax, include your withholding and estimated tax payments for the current year as well as any balance due from a prior year. If you credited an overpayment from last year's return to this year's estimated tax payment, be sure to include that amount too.
If you choose to deduct sales tax, you can deduct either the actual amount you paid or the amount from the table in the Schedule A instructions.
If you're subject to the AMT and have a state tax refund, you may benefit from claiming the sales tax deduction even if that deduction is lower than the deduction for state income tax. The reason is that the state income tax refund isn't taxable if you claim the sales tax deduction. Be sure to prepare your return both ways.
Use the IRS Sales Tax Deduction Calculator to see if your sales tax deduction is more beneficial.
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