Can I deduct sales taxes on my tax return?

We’re often asked if sales taxes are deductible when paid on things like new cars, or other large purchases.
 
When it comes to the deductibility of sales taxes, there are different rules for individuals versus businesses.
 
Individuals:

• Yes, sales taxes can be deductible, but only if you itemize deductions, versus taking the standard deduction.
• You must choose between deducting state and local income taxes (SALT), or state and local sales taxes — you cannot deduct both.
• Most people opt to deduct SALT because they are usually higher, but if you live in a state with no income tax (i.e. - Nevada, Florida, Texas, Washington, etc.), the sales tax deduction may be more beneficial.
• If it’s financially better to deduct sales taxes, you can either:
  • Track actual sales tax paid throughout the year (usually best with large purchase like a car), or
  • Use the IRS sales tax deduction calculator (based on income, location, family size, and major purchases).

 
Businesses:

• Sales tax paid on business purchases is generally not deductible because it's considered part of the cost of goods sold, or capitalized into the asset.
• However, sales tax collected from customers on the sale of retail goods is also not counted as net income, since total income collected, including sales taxes, can be offset by a sales tax deduction.