Texas – Federal Sales Tax Deductions

2/20/2013

SALT Report 2170 – In the latest edition of Tax Policy News, the Texas Comptroller reminds taxpayers that if they itemize deductions on their federal income tax returns they can also deduct most state and local sales or use taxes paid during the 2012 calendar year.  To claim the deduction, taxpayers can either:

  • Keep receipts and claim the actual amount of taxes paid, or

Taxpayers who have built new homes or who have improved their homes in 2012 may deduct the sales tax paid on the materials that were incorporated into the property. To be eligible for the deduction, the homeowner must have:

  • Purchased the materials directly from, and paid tax to, the building materials supplier, or
  • Worked with a contractor under a separated contract

However, lump-sum contracts are not eligible for the deduction because a contractor working for a lump-sum price pays sales tax on their materials at the time of purchase and does not collect tax from its customer. Since the customer does not pay tax to the contractor, the customer cannot deduct the sales tax on their federal income tax return.

For Further Information

Texas Comptroller of Accounts – Tax Deductions on 2012 Federal Income Tax Returns