Tax Blog

February 19, 2009
Deducting Paid Income Taxes On Your Federal Income Tax Return
categorized as: Tax Deductions

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It sometimes seems unfair that both the Federal and State governments can tax us on our income. The IRS has tried, in part, to compensate for this. If you are itemizing your deductions (instead of taking the standard deduction, which is the default rate that the government deducts from your income), you may choose to deduct the amount of money that you paid on your state taxes during the year before. So, if you are filing your 2008 taxes, you may choose to deduct the amount you paid on your 2007 taxes. Because this is an option, if you are headed to someone new to do your taxes, be sure to bring your tax forms from the prior year.

Most people, in states that have a state income tax, will find that this is the best option. However, there are exceptions. If this is the only thing you have to itemize on your taxes, then unless you paid a very large amount of state taxes, you will probably find that the standard deduction will allow you to owe less money. The other exception is when you owe little or no state income tax, or when you have made a lot of large purchases during the year. The IRS gives you a choice between two taxes to deduct, and for people in this second category, sales tax may be a better choice. If you have lots of receipts for big-ticket items, it is worthwhile to bring in receipts and do a comparison to give you the largest deduction possible. If you don't have a large state tax bill, but don't have many receipts, the IRS offers a default amount based on your income and where you live that you may deduct instead.

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7 Responses

Fiscal Tax
Federal taxes would not be deductible. State taxes paid in 2011 would be deductible on your federal return if you are able to itemize deductions.
Bob Ramos
Due to a filling error I owed back taxes for 2009. In 2011 I paid the taxes. Are the taxes deductible?
Fiscal Tax
Babbs, You are correct. You must file a Schedule A (itemized deductions) to claim a deduction for state & local income taxes paid.
i wanted to know for sure if i do not itemize i cannot take off state income tax from previous years is this correct
Alice Saling
Can I deduct the payments I made on the income tax that owed the IRS in 2009?

I am retired and very confused about my taxes.

Thank You
Alice Saling
Fiscal Tax
State and local income taxes are deducted on Schedule A, line 5. If you itemized deductions on your 2008 return, included state and local taxes withheld, and paid additional tax to your state - then you can deduct the additional tax paid on your 2009 return.
Pam Sinclair
I have a lot of income with very little state taxes held from them. Can I deduct what I paid to state on 2008 tax form? If so where can i do this without a W2 showing this amount?

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