Taxpayers who itemize deductions on their federal income tax returns can deduct state and local taxes on real estate and personal property, as well as income taxes or general sales taxes. By deducting state and local taxes, the federal government is effectively subsidizing people with high incomes in high-productivity states and cities. Supporters of the SALT deduction, such as the National Governors Association, point out that state and local taxes on income, real estate and sales are mandatory. Because these tax issues can become complex, it's helpful to have expert guidance during tax season.
Many states and counties also impose local taxes on benefits for property improvements, such as evaluations of streets, sidewalks, and sewer lines. In some programs, the loan is secured by a lien on your home and appears as a special appraisal or special tax on your real estate tax bill during the loan period. Hi, I'm Scott from TurboTax and I have important news for all taxpayers who paid some type of state tax this year. However, if your state doesn't require you to pay income taxes or you suspect that you pay more in sales tax, you can deduct your sales tax payments, but you can never deduct both.
Taxpayers who itemize their deductions (meaning they don't take the standard deduction) can deduct what they paid in certain state and local taxes. The higher your income, the more valuable the tax deductions will be for you in general, because you are taxed at a higher rate. And finally, your state can charge you a separate tax on the value of your personal assets, such as your car. So, if you overpay your state taxes and get a refund, you may have to declare it as income in next year's federal budget.
That same report from the Tax Policy Center revealed that changing the SALT deduction could cause a change in local and state government revenues. In addition to the deduction of mortgage interest, the non-taxation of health benefits and employer-sponsored pension benefits, the preferential tax rates on capital gains, and the deferral of taxes on corporate profits earned abroad, the SALT deduction costs the federal government trillions in lost income opportunities. Most states, and even some local governments, impose an income tax on their residents and others who make money in their state. Some taxes and fees that you can't deduct on Schedule A include federal income taxes, social security taxes, transfer taxes (or stamp taxes) on the sale of properties, homeowner association fees, inheritance and inheritance taxes, and charges for water, sewer, or garbage collection services.
Therefore, if you pay these types of taxes, your payments are deductible on Schedule A, in addition to the state income or sales tax deduction.