As it comes time to file your 2017 tax returns, you will likely have to deal with managing expenses for your business. Whether you are self-employed, own your own company, or are required to submit an expense report after paying with a personal credit card, work-related expenditures can impact your tax returns. Not many know that in the United States, it is possible to write off sales tax. Yes, you read that correctly! The Internal Revenue Service allows you to write off either state or local income tax or sales tax when itemizing deductions.
Who Can This Benefit?
The sales tax deduction is most important in states that do not collect income taxes, but do have a state sales tax. It could also benefit taxpayers who face heavy local sales taxes. If you are a resident of a state with both types of taxes, you still can find the sales tax deduction useful, as it could be more valuable than the income tax write-off.
Am I Eligible To Itemize?
You can only deduct sales tax payments if you are eligible to itemize. Remember, generally speaking if your employer reimbursed you for expenses, you are not allowed to deduct these expenses. To determine if you are eligible to itemize, add up all of your expenses eligible to be itemized, including sales taxes. If the total is greater than the standard deduction amount for your filing status, then you can itemize on Schedule A and claim a sales tax deduction.
Receipts, Receipts, Receipts!
It’s been stressed many times, but the importance of receipts cannot be overlooked when managing expenses. Being able to gather and organize your receipts for the purchases throughout the year will make life a lot easier both with expense reports and year-end tax returns. If you decide to calculate the actual sales tax you paid during the year, then you must have a receipt for each purchase. To calculate the sales tax payments, you would simply add the sales tax from each receipt.
If your work for an employer that requires you to write-off expenses on your own, then you may benefit from deducting sales tax. It is certainly worth considering when filing your taxes this year.