You can deduct various federal, state, local, and foreign taxes directly attributable to your trade or business as business expenses.

See chapter 12 for information about getting publications and forms.

Generally, you can only deduct taxes in the year you pay them. This applies whether you use the cash method or an accrual method of accounting.

Under an accrual method, you can deduct a tax before you pay it if you meet the exception for recurring items discussed under Economic Performance in Publication 538. You can also elect to ratably accrue real estate taxes as discussed later under Real Estate Taxes.

A taxing jurisdiction can require the use of a date for accruing taxes that is earlier than the date it originally required. However, if you use an accrual method, and can deduct the tax before you pay it, use the original accrual date for the year of change and all future years to determine when you can deduct the tax.

Your state imposes a tax on personal property used in a trade or business conducted in the state. This tax is assessed and becomes a lien as of July 1 (accrual date). In 2008, the state changed the assessment and lien dates from July 1, 2009, to December 31, 2008, for property tax year 2009. Use the original accrual date (July 1, 2009) to determine when you can deduct the tax. You must also use the July 1 accrual date for all future years to determine when you can deduct the tax.

Uniform capitalization rules apply to certain taxpayers who produce real property or tangible personal property for use in a trade or business or for sale to customers. They also apply to certain taxpayers who acquire property for resale. Under these rules, you either include certain costs in inventory or capitalize certain expenses related to the property, such as taxes. For more information, see chapter 1.

Carrying charges include taxes you pay to carry or develop real estate or to carry, transport, or install personal property. You can elect to capitalize carrying charges not subject to the uniform capitalization rules if they are otherwise deductible. For more information, see chapter 7.

If you receive a refund for any taxes you deducted in an earlier year, include the refund in income to the extent the deduction reduced your federal income tax in the earlier year. For more information, see Recovery of amount deducted (tax benefit rule) in chapter 1.