Deduction for state and local tax

The state tax, local tax, and foreign income tax, sales tax, real estate tax and personal property tax are the four types of non-business tax that you can deduct on your tax return. A tax must be charged to you and you must have paid it during your tax year for it to be tax deductible on your tax return. Tax may be claimed only as an itemized tax deduction on Form 1040, Schedule A. State income tax and local income tax and property tax are therefore federal income tax deductible in the tax year paid on your tax return. It is often possible to choose the tax year in which a tax is paid and a tax deduction is received on your tax return because of the flexibility allowed in many states. State and local income tax withheld from your wages during the tax year are tax deductible on your tax return and appear on your Form W-2.

Any estimated tax you paid to state or local governments during the tax year, any payments you made with last tax year's state tax return or local tax return and any prior tax year's state income tax or local income tax you paid during the tax year are also tax deductible in your tax return. Tax deductible real estate tax is generally any state tax, local tax, or foreign tax on real property. The tax must be charged uniformly against all property and must be based on property value. As an employee, you can deduct on your tax return mandatory contributions to state benefit funds that provide protection against loss of salary.