Limit on itemized deductions.(p146)
The amount of adjusted gross income allowed without limiting your itemized deductions has increased. For 2008, if your adjusted gross income is more than $159,950 ($79,975 if you are married filing separately), you may have to reduce the amount of certain itemized deductions, including most miscellaneous deductions. For more information and a worksheet, see the instructions for Schedule A (Form 1040), line 29.taxmap/pub17/p17-116.htm#en_us_publink100033946
Deduction for general sales taxes extended.(p146)
The deduction for state and local general sales taxes that you can elect to take as an itemized deduction on Schedule A (Form 1040) instead of state and local income taxes was extended through 2009.taxmap/pub17/p17-116.htm#TXMP0f90f461
This chapter discusses which taxes you can deduct if you itemize deductions on Schedule A (Form 1040). It also explains which taxes you can deduct on other schedules or forms and which taxes you cannot deduct.
This chapter covers the following topics.
- Income taxes (federal, state, local, and foreign).
- General sales taxes (state and local).
- Real estate taxes (state, local, and foreign).
- Personal property taxes (state and local).
- Taxes and fees you cannot deduct.
Use Table 22-1 as a guide to determine which taxes you can deduct.
The end of the chapter contains a section that explains which forms you use to deduct different types of taxes.taxmap/pub17/p17-116.htm#en_us_publink100033947
You can deduct certain taxes only if they are ordinary and necessary expenses of your trade or business or of producing income. For information on these taxes, see Publication 535, Business Expenses.taxmap/pub17/p17-116.htm#en_us_publink100033948
These are taxes imposed by the 50 states, U.S. possessions, or any of their political subdivisions (such as a county or city), or by the District of Columbia. taxmap/pub17/p17-116.htm#en_us_publink100033949
An Indian tribal government that is recognized by the Secretary of the Treasury as performing substantial government functions will be treated as a state for purposes of claiming a deduction for taxes. Income taxes, real estate taxes, and personal property taxes imposed by that Indian tribal government (or by any of its subdivisions that are treated as political subdivisions of a state) are deductible. taxmap/pub17/p17-116.htm#en_us_publink100087257
These are taxes imposed at one rate on retail sales of a broad range of classes of items.taxmap/pub17/p17-116.htm#en_us_publink100033951
These are taxes imposed by a foreign country or any of its political subdivisions. taxmap/pub17/p17-116.htm#TXMP6f83ea5f
You may want to see:
Publication 514 Foreign Tax Credit for Individuals 530 Tax Information for First-Time Homeowners Form (and Instructions) Schedule A (Form 1040): Itemized Deductions Schedule E (Form 1040): Supplemental Income and Loss 1116: Foreign Tax Credittaxmap/pub17/p17-116.htm#en_us_publink100033952 taxmap/pub17/p17-116.htm#en_us_publink100033953
The following two tests must be met for you to deduct any tax.
- The tax must be imposed on you.
- You must pay the tax during your tax year.
Generally, you can deduct only taxes that are imposed on you.
Generally, you can deduct property taxes only if you are an owner of the property. If your spouse owns the property and pays the real estate taxes, the taxes are deductible on your spouse's separate return or on your joint return. taxmap/pub17/p17-116.htm#en_us_publink100033954
If you are a cash basis taxpayer, you can deduct only those taxes you actually paid during your tax year. If you pay your taxes by check, the day you mail or deliver the check is the date of payment, provided the check is honored by the financial institution. If you use a pay-by-phone account (such as a credit card or electronic funds withdrawal), the date reported on the statement of the financial institution showing when payment was made is the date of payment. If you contest a tax liability and are a cash basis taxpayer, you can deduct the tax only in the year you actually pay it (or transfer money or other property to provide for satisfaction of the contested liability). See Publication 538, Accounting Periods and Methods, for details.
If you use an accrual method of accounting, see Publication 538, for more information.