
Taxes that net a tax deduction
State and local income taxes, property taxes and other levies can be deducted from your taxable income. But some of those tax breaks require you to itemize.
This post is by Kay Bell of Bankrate.com.
If you can't beat 'em, join 'em. That philosophy works well in tax season, when you can use some tax payments to lower your Internal Revenue Service bill.
By itemizing deductions, you can subtract many nonfederal taxes you pay from your federal income. The less income you have, the less you owe Uncle Sam.

For folks who itemize, allowable deductions include state and local income taxes or, for some filers, sales taxes paid throughout the year, along with real estate taxes, personal property taxes and intangible taxes on investments.
If you paid estimated taxes to your state revenue department, don't forget to add those amounts to the state income taxes that were withheld from your paychecks throughout the year.
And taxpayers in California, New Jersey, New York, Rhode Island and Washington may deduct mandatory payments made to those states' disability and compensation funds. Employee contributions to private or voluntary disability programs are not deductible. (Post continues after video.)
Schedule A even offers itemizing taxpayers a catchall line (line 8) for "other" taxes. Here you can deduct occupational taxes or any foreign income taxes.
Foreign taxes are not that unusual, especially for investors whose holdings include mutual funds that invest -- and pay dividend taxes -- overseas. If that's the case, you'll find the foreign tax amount in box 6 of the Form 1099-DIV that your fund manager has sent you. This amount may be worth more tax savings to you, however, as a credit on line 47 of your Form 1040.
But don't get carried away in deducting taxes. There are some payments that Uncle Sam won't allow you to subtract from your federal income, including:
- Federal excise taxes
- Social Security and Medicare, or FICA, taxes
- Federal unemployment, or FUTA, and railroad retirement, or RRTA, taxes
- Customs duties
- Federal estate and gift taxes
- State gasoline taxes
- Car registration and inspection fees
- Transfer, or stamp, taxes on the sale of property
- License fees, such as driver's, marriage or pet tags
- Assessments for sidewalks or other property improvements
- Parking and traffic tickets or other fines
- And if you paid any tax penalties or interest, sorry. These charges aren't deductible either.
Previously, homeowners who claimed the standard deduction were allowed to add at least some of their real estate tax payments to their standard deduction amount. That's no longer an option.
The add-on of property taxes to the standard amount expired at the end of the 2009 tax year, and it was not part of the tax bill enacted in December 2010 extending other tax breaks. So to deduct property taxes on your 2011 tax return, you must itemize.
Another standard tax deduction addition also is gone for 2011 taxes.
Individuals who bought a new vehicle between Feb. 17, 2009, and Dec. 31, 2009, were allowed to include that sales tax as part of their standard deduction on their 2009 tax return. There's no such choice for standard deduction filers who bought a motor vehicle this tax-filing season.
But a long-standing sales tax addition for taxpayers who itemize remains. If you bought a motor vehicle in 2011, sales tax paid on that purchase can be added to the rest of the sales tax amount you deduct on Schedule A.
And what, in the IRS' estimation, is a motor vehicle? The definition includes cars, motorcycles, motor homes, recreational vehicles, sport utility vehicles, trucks, vans and off-road vehicles. You also can deduct the sales tax paid on a plane or boat if the tax rate was the same as your state's general sales tax rate.
Just add the vehicle's (or boat's or plane's) sales tax amount to the state and local sales tax amount you enter on line 5b of Schedule A. For most filers, the amount of general sales tax is found in the tables provided for each state in the Schedule A instructions.
And your total deductible sales tax amount -- your state taxes, any local sales taxes and motor vehicle sales tax additions -- is calculated using the general sales tax deduction worksheet that's also found in the Schedule A instructions.
More from Bankrate.com and MSN Money:
TAX them, tax them, tax them all, then tax them again until they bawl. Then when you have taxed them into a free for all, then tax them again when they die, no amount is too small.
I am fed up with a government ELITE bunch of criminals that hold us all captive to what their whims and wants are. Government employees take their pay from our labors and then act like we are their personal slaves. What would your boss, who pays your salary, do if you decided to tell him he had to pay you more or else you would confiscate his bank savings and checking accouts?
WE pay for government, and government exists because of us workers, but government thinks we exist only to be raped of our wages for its own interests, which are NOT always about OUR well being and best interests. This article suggests that by paying MORE taxes you "SAVE" money! I guess it is like saying SPENDING MORE is the way out of DEBT.
Maybe I am just starting to realize, we work our butts off try and do well for our family
and then as soon as you make a certain amount of salary we get screwed..
1. My kids do not qulaify for any student aid for college.
which is costing us approx $ 24,000+ per year for tuition and living expenses, and can
only write off $4-5,000.00..So called we earn to much..
2. I cannot write-off the losses on our rental properties, because of some stupid loss after passive limitations law, but yet if you make under $100,000 you can write off most of the losses up to i think $ 25.000 or so..meanwhile the IRS wants me to rollover my losses why??
3. It's like were being penalized for trying to do well for our families,,meanwhile our hard earned tax dollars are helping other young men and women go to college except our own I do not mind
paying a fair share, BUT REALLY it is not a FAIR SHARE..The TAX system needs to be fixed badly..It is really discouraging people from trying to do better, very discouarging..
Seems like the tax system is ripe for lawsuits.
Individuals are personally responsible for properly filing their taxes and paying what they are supposed to, yet the system is so convoluted and confusing that they can't say the average person understands enough about it to pay what they are actually supposed.
I sincerely hope to God that this makes it to the courts. Quite possibly the only branch of our government left to place our hopes upon for a fair system people can understand because it makes sense.
Weldon, Yes and No,,on your idea..I have a TRI-PLEX..
It is investment property, I have a mortgage, with that
comes interest/prop taxes,insurance, keeping up the 3
properties inside and out gardening etc. and because of
our income we cannot write-off any of this on our taxes we
have to roll over the losses, when did this start and why??
I should not have to live in one of them to get the TAX breaks..
It all comes down to money SAD..which we pay alot of in TAX already,
instead of the IRS letting us keep some of it for retirement and our kids
college education,they want to take more and I am fed up..
Only fix I see is to start maxing out our retirement accounts to the limit and knock down our AGI.
Annial gross income..Any ideas...
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