Topic No. 503, Deductible Taxes

Generally, you may take an itemized deduction, subject to limitations, for certain state, local, and foreign taxes you pay even if you did not pay the tax while in a trade or business or while carrying on a for-profit activity. You deduct the tax in the taxable year you pay them.

The categories of deductible taxes are:

  • State, local, and foreign income taxes or state and local general sales taxes in lieu of state and local income taxes
  • State and local real property taxes, and
  • State and local personal property taxes.

State, Local, and Foreign Income Taxes or State and Local General Sales Taxes

You may deduct as an itemized deduction, state and local income taxes withheld from your wages during the year (as reported on your Form W-2, Wage and Tax Statement) and estimated state and local income taxes and prior years' state and local income taxes paid during the year. Alternatively, you can elect to deduct state and local general sales taxes. A general sales tax is a tax imposed at one rate on retail sales of a broad range of items. A taxpayer makes the election by checking box 5a on Schedule A of Form 1040. If you elect to deduct state and local general sales taxes, you can use either your actual expenses or the optional sales tax tables. Refer to the Instructions for Schedule A (Form 1040)PDF for more information and for the optional sales tax tables. You may also use the Sales Tax Deduction Calculator.

Generally, you can take either a deduction or a tax credit for foreign income taxes imposed on you by a foreign country or a United States territory. For information regarding the foreign tax credit, refer to Topic No. 856 and online tool, Am I Eligible to Claim the Foreign Tax Credit?

As an employee, you can deduct mandatory contributions to state benefit funds that provide protection against loss of wages such as required contributions to state funds providing disability or unemployment insurance benefits. Refer to Publication 17, Your Federal Income Tax for Individuals for the states that have such funds.

State and Local Real Property Taxes

Deductible real property taxes are generally any state or local taxes on real property levied for the general public welfare. The charge must be uniform against all real property in the jurisdiction at a like rate.

Many states and counties also impose local benefit taxes for improvements to property, such as assessments for streets, sidewalks, and sewer lines. In general, local benefits taxes are deductible only if they're for maintenance, repair, or interest charges related to those benefits. See Taxes for local benefits in Chapter 11 of Publication 17.

State and Local Personal Property Taxes

Deductible personal property taxes are those based only on the value of personal property such as a boat or car. The tax must be charged to you on a yearly basis, even if it's collected more than once a year or less than once a year.

Overall Limit

As an individual, your deduction of state and local income, general sales, and property taxes is limited to a combined total deduction of $10,000 ($5,000 if married filing separately). You may be subject to a limit on some of your other itemized deductions also. Please refer to the Instructions for Schedule A (Form 1040) and Topic No. 501 for the limitations.

Nondeductible Taxes

You may not deduct certain taxes and fees on Schedule A, including but not limited to:

  • Federal income taxes.
  • Social security taxes.
  • Transfer taxes (such as taxes imposed on the sale of property).
  • Stamp taxes.
  • Homeowner's association fees.
  • Estate and inheritance taxes.
  • Service charges for water, sewer, or trash collection.

Refer to the Instructions for Schedule A (Form 1040) and Publication 17 for more taxes you can't deduct.

Additional Information

Can I Deduct Personal Taxes That I Pay as an Itemized Deduction on Schedule A?