question.jpgIn Federal Income Tax

Can I deduct tax payments?

If you are itemizing your deductions (as opposed to taking the standard deduction), you can generally deduct other tax payments which were imposed on you and which you paid during the tax year. Principally among the taxes you can deduct are:

1. State, local and foreign income tax.

2. State and local sales tax (this is only for the 2005 and 2006 tax years, and only if you elect to deduct these instead of state and local income tax).

3. Real estate tax.

In addition to these tax expenses, you can also generally deduct state and local taxes on personal property and taxes which were related to the operation of a business (except for sales tax).

The types of taxes you generally cannot deduct include federal income tax, mortgage tax, homeowners’ association fees, social security payments, alcoholic and tobacco taxes, automobile license and driver’s fees, federal gasoline taxes, estate taxes, inheritance taxes, legacy or succession taxes, gift taxes and taxes paid in connection with the sale of securities or investment real estate.

Generally, the only limit to the amount of tax expenses you can deduct, for taxes that are deductible, is the 2% reduction (if it applies to your situation).