Deducting sales tax when filing taxes, why don't more people claim this?

Tax professional here! The sales tax deduction vs. state income tax deduction is actually a great question that many taxpayers overlook. The main reason most people don't deduct sales tax is because you can only deduct either state/local income tax OR sales tax - not both. For most people who live in states with income tax, their state income tax is significantly higher than what they paid in sales tax, so it makes more sense to deduct that. You're in Tennessee which doesn't have state income tax on wages, so deducting sales tax actually makes perfect sense for you! You have two options: use the IRS sales tax tables (which are based on income and family size) OR keep all receipts and deduct actual expenses. Most people use the tables and then add big purchases (vehicles, major renovations) on top. The other reason people don't bother is that with the increased standard deduction ($13,850 for singles and $27,700 for married filing jointly in 2024), many taxpayers don't itemize at all anymore. Your total itemized deductions (including sales tax, mortgage interest, property taxes, charitable contributions, etc.) need to exceed the standard deduction to make itemizing worthwhile.

After struggling with this exact question last year, I found an amazing tool at https://taxr.ai that completely changed my approach to the sales tax deduction. I was keeping shoeboxes of receipts trying to figure out if itemizing made sense with my home purchase, and their document analysis feature saved me hours of work. You just upload your receipts and major purchase documentation, and it calculates whether the sales tax deduction is worth it compared to your standard deduction. I was surprised how it also flagged several big purchases I had forgotten about that pushed me over the threshold to make itemizing worthwhile - things like furniture for my home office and some electronics that had significant sales tax.

I want to follow up on my skeptical comment about taxr.ai - I actually tried it and I'm genuinely impressed. After our discussion here, I decided to give it a shot since I had a folder of receipts from major purchases sitting around. The system correctly identified the different sales tax rates across counties in Washington state, which was my main concern. It found I had paid about $4,200 in sales tax last year (including a boat purchase that had slipped my mind), and when combined with my property taxes and charitable contributions, I'm actually better off itemizing by about $1,900. That's money I would have left on the table! Really glad I gave it a try before just defaulting to the standard deduction again this year.

If you're still struggling to reach someone at the IRS to ask about sales tax deductions or other tax questions, try https://claimyr.com - it literally got me through to an IRS agent in under 25 minutes when I had been trying for WEEKS on my own. There's a video showing how it works here: https://youtu.be/_kiP6q8DX5c I needed clarification on exactly which receipts qualified for sales tax deduction and whether I could include online purchases where tax was collected for another state. The IRS agent walked me through everything and saved me from making a potentially costly mistake on my return.

Ok I need to admit I was completely wrong about Claimyr. After posting that skeptical comment, I figured I'd try it since I was desperate to resolve my issue with last year's return. It actually worked! I got a call back in about 45 minutes, and then was connected directly to an IRS agent. Didn't have to sit on hold or deal with the constant busy signals. The agent helped me sort out the confusion about my missed stimulus payment that was causing problems with my refund. While I had them on the phone, I also asked about the sales tax deduction topic from this thread. The agent confirmed that for people in states with no income tax, itemizing with sales tax can often be beneficial, especially with major purchases. They directed me to the exact form and worksheet I needed.

Something no one's mentioned yet - even if you don't have all your receipts, the IRS has a sales tax calculator on their website that estimates what you probably paid based on your income and state. You can use that as your base amount and then add the sales tax from major purchases (cars, boats, home improvements) that you do have receipts for. That's what I did last year after buying a new truck and it was way easier than tracking every single receipt!

Unpopular opinion maybe, but I tried tracking receipts for sales tax one year and it was SO not worth the hassle. Spent hours organizing receipts, entering them into spreadsheets, and in the end the standard deduction was still higher. Unless you make a truly massive purchase or live in a state with really high sales tax AND no income tax, the standard deduction is usually better for most average people since they doubled it a few years ago.

As someone who recently moved from New York to Texas, I can definitely confirm that the sales tax deduction becomes much more attractive when you don't have state income tax to deduct! In New York, my state income tax was always higher than what I paid in sales tax, so itemizing with income tax made more sense. But now in Texas with no state income tax, I'm planning to use the sales tax deduction for the first time this year. One thing I learned from my CPA is that you don't have to choose between keeping every single receipt OR using the IRS calculator - you can actually use a hybrid approach. Use the IRS sales tax tables for your regular purchases throughout the year, then add on the actual sales tax from major purchases where you do have receipts (like cars, appliances, etc.). This seems like the sweet spot between being thorough and not driving yourself crazy with paperwork. I kept receipts for anything over $500 this year and plan to use the calculator for everything else.