Tax laws allow taxpayers to deduct certain types of taxes that they have paid. This lessens the burden of the Federal income tax.
There are exclusively four types of deductible non-business taxes:
- State, local and foreign income taxes
- State, local and foreign real estate taxes
- State, and local personal property taxes, and
- State and local general sales taxes
Non-deductible taxes include:
- Federal income taxes
- Employer FICA taxes paid on domestic household workers
- Estate, inheritance, and gift taxes
- FICA taxes imposed on employees
- Taxes on real property to the extent such taxes are to be apportioned and treated as imposed on another taxpayer
- Federal, state, and local excise taxes (e.g., gasoline, tobacco, and spirits)
- Foreign income taxes if the taxpayer chooses the foreign tax credit option
Deductible Taxes State Local and Property
In addition to this list, fees for dog licenses, automobile inspections, automobile titles and registration, hunting and fishing licenses, bridge and highway tolls, drivers’ licenses, parking meter deposits, and postage are not deductible if personal in nature. These items could be deductible if incurred as a business expense or for the production of income. This will not be the situation for most taxpayers and taxpayers should think carefully before deducting these types of taxes on their tax returns.
State, local, and foreign taxes on real property are generally deductible
State, local, and foreign taxes on real property are generally deductible only by the person upon whom the tax is imposed. For taxes to be deductible, the tax must be imposed on you and must have been paid during your tax year. Deductible real estate taxes are generally any state, local, or foreign taxes on real property levied for the general public welfare. As a general rule, real property taxes do not include taxes assessed for local benefits because such assessments tend to increase the value of the property (e.g., special assessments for streets, sidewalks, curbing, and other improvements.)
Claiming Other Taxes on Form 1040
Taxes may be claimed only as an itemized deduction on Form 1040, Schedule A (PDF), Itemized Deductions. Because it is an itemized deduction, it will generally help wealthier taxpayers who tend to itemize. Taxpayers cannot deduct these types of taxes if they take the standard deduction.