Connecticut residents who make a lot of big purchases throughout the year may wonder if they can use that to their advantage come tax time. The answer is, maybe. It may be possible to deduct sales tax and reduce the amount of taxes one owes. How does that work?
Every tax season, one has to choose if he or she will itemize or take the standard deduction. If itemizing, one can then choose between deducting local and state income taxes or sales tax. It is not possible to take both deductions.
Taking the sales tax deduction is only worth it if one has paid a large sum in sales tax. If one goes this route, it is necessary to have receipts to back up any sales tax claims. Without receipts, if picked for an audit, the end result will not likely be a positive one.
The Internal Revenue Service offers sales tax tables and a deduction calculator to make it easier for individuals to figure out if the sales tax deduction is worth their while. At the end of the day, most Connecticut residents would benefit from just deducting state and local taxes or taking the standard deduction. Every case is different.
Those who have questions about sales tax and if they should deduct when filing their taxes can ask questions about it before making such a significant decision. There is a lot to lose by making the wrong choice or taking the deduction without sufficient documentation. An experienced tax law attorney can answer any questions Connecticut residents have regarding sales tax and sales tax deductions.