How to Calculate Sales Tax Deduction
- 1). Add your adjusted gross income, found on line 38 of form 1040, to any nontaxable interest you earned, veterans' benefits, workers compensation, nontaxable combat pay, economic recovery payments, nontaxable retirement income, public assistance and nontaxable unemployment. This will calculate your income for the purposes of the sales tax deduction.
- 2). Determine the number of exemptions you claimed on your taxes. This number can be found on line 7 of your form 1040 tax return.
- 3). Determine the amount you can deduct using the sales tax deduction tables found in the Schedule A instructions for your state. For example, for the 2009 tax year, if you lived in Illinois, had a total income of $55,000 and had three exemptions, your deduction would be $680.
- 4). Find the value of your local sales tax deduction, if applicable, by using the tables on page 15 of the Schedule A instructions using the same income and exemption numbers. For example, if you lived in Chicago, IL, you would use table A to find your local sales tax deduction would be $110.
- 5). Add the state sales tax deduction to the local sales tax deduction to calculate your total sales tax deduction. In this example, you would add $680 to $110 to find the total deduction would be $790. This amount gets reported on line 5 of your Schedule A and will reduce your taxable income for the year.
