16.1 Deductible Taxes

If you itemize deductions for 2012 on Schedule A (Form 1040), you may deduct your 2012 payments of:

  • State, local, and foreign income taxes
  • State, local, and foreign real property taxes
  • State and local personal property taxes

Congress is expected to extend to 2012 the option to deduct state and local general sales taxes in lieu of state and local income taxes (16.3), but had not done so when this book went to press; see the e-Supplement at jklasser.com for an update.

In figuring deductible state or local income taxes, include the amount of state or local income tax withheld from your 2012 pay, any state or local estimated tax for 2012 that you paid in 2012, and any part of a prior year refund that you credited to your 2012 state or local tax. Also, do not forget to include state and local tax that you paid in 2012 when you filed your 2011 state and local tax returns.

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image Filing Tip
State Income Tax Paid in 2012 For 2011
In figuring your 2012 itemized deduction for state and local income taxes paid, remember to include tax that you paid in 2012 when you filed your 2011 state and local tax returns.
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Taxes incurred in your business are generally deductible on Schedule C (16.9).

Claim the deduction for deductible taxes on the tax return for the year in which you paid the taxes, unless you report on the accrual basis (16.7).

Table 16-1 Checklist of Taxes

Type of tax— Deductible as itemized deduction—
Admission No
Alcoholic beverage No
Assessments for local benefits No
Automobile license fees not qualifying as personal property tax No
Cigarette No
Customs duties No
Driver’s license No
Estate—federal or state No*
Excise—federal or state, for example, on telephone service No
Gasoline—federal No
Gasoline and other motor fuel—state and local No
Gift taxes—federal and state No
Income—federal (including alternative minimum tax) No
Income—state, local, or foreign Yes
Inheritance tax No
Mortgage tax No
Personal property—state or local Yes
Poll No
Real estate (state, local, or foreign) Yes
Regulatory license fees (dog licenses, parking meter fees, hunting and fishing licenses) No
Sales—state and local general sales tax Yes
Social Security No
Tolls No
Transfer taxes on securities and real estate No

* But see the exception for miscellaneous itemized deduction for estate tax paid on “income in respect of a decedent” (11.17).

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