What taxes are deductible on a federal income tax return?

Written by FreeAdvice Staff

There are several kinds of taxes that are deductible, but not all deductions are available for all taxpayers   Most tax deductions are available only on Form 1040.  Form 1040A has limited deductions available and no deductions are available on form 1040EZ. 

Self -employment taxes are deductible for everyone who is self employed.  They are an above-the-line deduction that reduces AGI (Adjusted Gross Income).  Above the line deductions appear on the front page of form 1040 and may be deducted whether you are able to itemize deductions or not.  They are also deductions in addition to standard deductions, which make them more valuable.

State and local income taxes (or if you elect instead, sales tax), real estate taxes and personal property taxes are deductible if you are able to itemize, on Schedule A. Property taxes held in an escrow account are not deductible until actually paid by the escrow company to the taxing authority.  The option to deduct sales tax in lieu of state and local income taxes is expected to become a permanent option.  The main reason for this option is to allow fair treatment for taxpayers located in states that do not have state income tax.

Foreign income taxes can be deductible but there is also a credit available for foreign income taxes and that normally produces a better result than a deduction.  That is something that should be discussed with your tax consultant.

For more information on deductibility of taxes, see IRS Publication 17.

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