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Sales Tax Deduction: How It Works, How to Calculate
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Compare what you paid in sales tax to your state and local taxes. Deduct the larger of the two. But there's a catch.
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23 years of experience Expertise Taxes Small business Social Security and estate planning Home services RIATina Orem is an editor and content strategist at NerdWallet. Prior to becoming an editor and content strategist, she covered small business and taxes at NerdWallet. She has a degree in finance, as well as a master's degree in journalism and an MBA. Previously, she was a financial analyst and director of finance at public and private companies. Tina's work has appeared in a variety of local and national media outlets.
Tina Orem is an editor and content strategist at NerdWallet. Prior to becoming an editor and content strategist, she covered small business and taxes at NerdWallet. She has a degree in finance, as well as a master's degree in journalism and an MBA. Previously, she was a financial analyst and director of finance at public and private companies. Tina's work has appeared in a variety of local and national media outlets. Published in Editor & Content Strategist + more + more
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11 years of experienceChris Hutchison helped build NerdWallet's editorial operation and has directed coverage across banking, investing, taxes and insurance. He now leads a team exploring new verticals. Before joining NerdWallet, he was an editor and programmer at ESPN and an editor at the San Jose Mercury News.
Chris Hutchison helped build NerdWallet's editorial operation and has directed coverage across banking, investing, taxes and insurance. He now leads a team exploring new verticals. Before joining NerdWallet, he was an editor and programmer at ESPN and an editor at the San Jose Mercury News. Head of Content, New Verticals + more + moreWhat is the sales tax deduction?
What is the sales tax deduction?On your tax return, you can deduct the state and local general sales tax you paid during the year, or you can deduct the state and local income tax you paid during the year. You can’t do both. Here’s how the sales tax deduction works and how you can determine the best route for you.
On your tax return, you can deduct the state and local general sales tax you paid during the year, or you can deduct the state and local income tax you paid during the year. You can’t do both. Here’s how the sales tax deduction works and how you can determine the best route for you.What’s deductible?
What’s deductible?In general, the IRS lets you deduct one of the following:
In general, the IRS lets you deduct one of the following: In general, the IRS lets you deduct one of the following:Your state and local general sales tax, or
Your state and local general sales tax, orYour state and local income tax.
Your state and local income tax.State and local general sales taxes generally include either:
State and local general sales taxes generally include either: State and local general sales taxes generally include either:Your actual sales tax expense on purchases, which can mean meticulous record-keeping, or
Your actual sales tax expense on purchases, which can mean meticulous record-keeping, orAn estimate of what you paid, which you can calculate using the IRS’ sales tax worksheet or sales tax deduction calculator.
An estimate of what you paid, which you can calculate using the IRS’ sales tax worksheet or sales tax deduction calculator .State and local income taxes generally include:
State and local income taxes generally include: State and local income taxes generally include:State and local income taxes withheld from your wages.
State and local income taxes withheld from your wages.Estimated income taxes you paid to state or local governments during the year.
Estimated income taxes you paid to state or local governments during the year.State and local income taxes you paid during the year that were actually for a prior year.
State and local income taxes you paid during the year that were actually for a prior year.Mandatory contributions to state benefit funds that protect against lost wages (certain states only).
Mandatory contributions to state benefit funds that protect against lost wages (certain states only). AD Owe $10,000+ or More? This Tax Season Could Be Your Chance to Qualify Each year the IRS writes off millions in tax debt, yet few have applied. Learn moreon Anthem Tax Services' website
AD Let’s resolve your tax issues: Tax Relief & Resolution Services for IRS Tax Debt Certified Enrolled Agents, CPAs, and Tax Attorneys on your case. Learn moreon TaxRise's website
How to take advantage of the sales tax deduction
How to take advantage of the sales tax deductionCompare what you paid in sales tax for the year to what you paid in state, local and foreign income tax for the year. Then deduct the larger of the two amounts.
Compare what you paid in sales tax for the year to what you paid in state, local and foreign income tax for the year. Then deduct the larger of the two amounts.Reid Riker, a certified public accountant in Reno, Nevada, says these things can speed up the decision.
Reid Riker, a certified public accountant in Reno, Nevada, says these things can speed up the decision.Look at where you live. If you live in a state that doesn’t have a sales tax, then the income tax deduction is probably for you. The same goes for people in high-income-tax states, Riker says. “By and large, for most large-income earners in states such as California or New York or other states that have a state income tax, you usually find that it's better for folks to take the state income tax deduction because it's usually larger,” he says. Conversely, if you live in a state with no income tax, the sales tax deduction will probably be the better choice.
Look at where you live. Look at where you live. If you live in a state that doesn’t have a sales tax, then the income tax deduction is probably for you. The same goes for people in high-income-tax states, Riker says. “By and large, for most large-income earners in states such as California or New York or other states that have a state income tax, you usually find that it's better for folks to take the state income tax deduction because it's usually larger,” he says. Conversely, if you live in a state with no income tax, the sales tax deduction will probably be the better choice.Reflect on your life. Sounds serious, but all this means is that if you recently made some big purchases — new appliances, a car, travel or lots of furniture, for example — you may have paid a lot of sales tax during the year. That could easily swing the pendulum in favor of taking the sales tax deduction. Likewise, if you started making a lot more money, you may have paid a lot more state income tax during the year, which means deducting your state and local income taxes might be the better choice.
Reflect on your life. Reflect on your life. Sounds serious, but all this means is that if you recently made some big purchases — new appliances, a car, travel or lots of furniture, for example — you may have paid a lot of sales tax during the year. That could easily swing the pendulum in favor of taking the sales tax deduction. Likewise, if you started making a lot more money, you may have paid a lot more state income tax during the year, which means deducting your state and local income taxes might be the better choice.Be aware of the limits. Your deduction of state and local income taxes, sales taxes and property taxes — also known as the SALT deduction — is capped at $40,000 ($20,000 if married filing separately) for tax year 2025
Be aware of the limits. Be aware of the limits. Your deduction of state and local income taxes, sales taxes and property taxes — also known as the SALT deduction — is capped at $40,000 ($20,000 if married filing separately) for tax year 2025 Congress.gov. H.R.1: One Big Beautiful Bill Act. Accessed Jul 10, 2025. . For tax year 2026, this limit is $40,400.» MORE: How the SALT deduction works
» MORE: » MORE: How the SALT deduction worksHow to claim the sales tax deduction
How to claim the sales tax deductionUse Schedule A when you file your tax return. Schedule A is where you figure your deduction. (You’ll need to do this if you take the income tax deduction, too.) Either way, this means you’ll need to itemize your taxes instead of taking the standard deduction. It’ll probably take more time to do your taxes if you itemize, but you could end up with a lower tax bill. (Go here for help deciding whether to itemize.)
Use Schedule A when you file your tax return. Use Schedule A when you file your tax return. Schedule A is where you figure your deduction. (You’ll need to do this if you take the income tax deduction, too.) Either way, this means you’ll need to itemize your taxes instead of taking the standard deduction. It’ll probably take more time to do your taxes if you itemize, but you could end up with a lower tax bill. ( Go here for help deciding whether to itemize. )Think about using the IRS’ official estimator. There are two ways to calculate your sales tax deduction:
Think about using the IRS’ official estimator. Think about using the IRS’ official estimator. There are two ways to calculate your sales tax deduction:Pull your hair out trying to find receipts for everything you bought during the year, so you can add up the sales tax, or
Pull your hair out trying to find receipts for everything you bought during the year, so you can add up the sales tax, orJust estimate what you paid by using the IRS’ sales tax tables, which you can find in the instructions to Schedule A. You can also use the IRS’ sales tax deduction calculator. “My advice to the receipt-keepers is, if you have a normal year as far as purchases … you don't need to keep the receipts, and you can just use the IRS sales tax calculator; it'll still give you a pretty handsome deduction,” Riker says. Plus, the receipt-keeping method rarely bests the IRS estimation method. “Usually, people come out better with the general tax calculator,” he says.
Just estimate what you paid by using the IRS’ sales tax tables, which you can find in the instructions to Schedule A. You can also use the IRS’ sales tax deduction calculator. “My advice to the receipt-keepers is, if you have a normal year as far as purchases … you don't need to keep the receipts, and you can just use the IRS sales tax calculator; it'll still give you a pretty handsome deduction,” Riker says. Plus, the receipt-keeping method rarely bests the IRS estimation method. “Usually, people come out better with the general tax calculator,” he says.Sometimes you can have it both ways. You can use the IRS estimation method and then add the sales tax you paid on certain big purchases, such as a car, boat or home improvements (the Schedule A instructions detail the rules). In those cases, it really can pay to keep those receipts — they might pad your deduction, Riker says.
Sometimes you can have it both ways. Sometimes you can have it both ways. You can use the IRS estimation method and then add the sales tax you paid on certain big purchases, such as a car, boat or home improvements (the Schedule A instructions detail the rules). In those cases, it really can pay to keep those receipts — they might pad your deduction, Riker says. AD Owe $10,000+ or More? This Tax Season Could Be Your Chance to Qualify Each year the IRS writes off millions in tax debt, yet few have applied. Learn moreon Anthem Tax Services' website
AD Let’s resolve your tax issues: Tax Relief & Resolution Services for IRS Tax Debt Certified Enrolled Agents, CPAs, and Tax Attorneys on your case. Learn moreon TaxRise's website
Helpful resources
Helpful resources How Federal Tax Brackets and Rates Work Federal Income Tax Calculator and Refund Estimator 2025-2026 Capital Gains Tax: Long and Short-Term Rates for 2025-2026 10 Key IRS Tax Forms, Schedules and Publications for 2026 More like this How to Move in 2026 Shopping Homeownership Taxes Popular Tax Credits for 2026: How They Work Tax credits can come in handy when it's time to file your return. Here's a breakdown of common ones, including the earned income credit, child tax credit and clean energy credits. 2 By Sabrina Parys, Tina Orem 25 Popular Tax Deductions and Tax Breaks for 2025-2026 A deduction cuts the income you're taxed on, which can mean a lower bill. A credit cuts your tax bill directly. Learn more about common tax breaks and write-offs — and how to claim them. 2 By Sabrina Parys, Tina Orem Itemized Deductions: What They Are, Examples Itemizing allows you to pick and choose your tax deductions. Common deductions include those for medical expenses, mortgage interest and property tax. 2 By Tina Orem, Sabrina Parys Get started Get startedon Priority Tax Relief's website
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