RL32781
Federal Deductibility of State and Local Taxes
September 30, 2008
Download Locations
Summary
The interplay between the federal and state and local tax systems through the federal deductibility of state and local taxes is the focus of this report. Generally, individual taxpayers who itemize deductions are allowed to deduct real and personal property taxes, and general sales taxes or state and local income taxes from federal taxable income. Taxpayers must choose between sales taxes or income taxes; they cannot deduct both. In 2004, Congress modified the deductibility of state and local taxes - adding the sales tax deduction option for 2004 and 2005 - and the 109th Congress extended the sales tax deduction option for 2006 and 2007. In the 110th Congress, 11 bills have been introduced that would make the sales tax deduction permanent
