If you itemize deductions on Schedule A, you may deduct your payments of state, local, and foreign income taxes and real property taxes, as well as state and local personal property taxes. You have the option of deducting state and local general sales taxes in lieu of state and local income taxes; see 16.3.
To increase your deduction for state and local taxes, consider making a year-end prepayment of estimated tax liability. You also may be able to increase withholdings from your pay to increase your deduction.
If you pay transfer taxes on the sale of securities or investment real estate, the taxes are not deductible. However, they reduce the sales price when figuring your profit or loss.
Taxes paid in operating a business are generally deductible, except for sales taxes, which are added to the cost of the property.
If your adjusted gross income for 2016 exceeds the threshold for your filing status, your deduction for taxes is subject to the reduction of itemized deductions (13.7).
16.1 Deductible Taxes
If you itemize deductions for 2016 on Schedule A (Form 1040), you may deduct your payments in 2016 of:
- State, local, ...