Submitted By: Gary
Answered: July 6, 2015 10:05 am

We live in Illinois but bought a car in Minnesota. We had to pay sales tax to our state. Can we deduct it?

On 2014 returns, taxpayers can choose to deduct state and local income taxes or state and local sales taxes. Those who opt to deduct state and local sales tax take the amount of their deduction from an IRS table based on the number of people and income in the household. However, taxes on big ticket items, such as the purchase of a car, can be added to the amount from the table.  Compare the two possible deductions (income or sales tax) and take the greater amount. Note: For 2015, the option to deduct state and local sales tax does not apply unless Congress extends it.

Tax Glossary

Gift tax

Gifts in excess of an $12,000-per-donee annual exclusion are subject to gift tax, but the tax may be offset by a gift tax credit.

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