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What Taxes Are Deductible?
| Which Taxes Can You Deduct?
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You Can Deduct |
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You Cannot Deduct |
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| Income Taxes |
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State and local income taxes. |
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Federal income taxes. |
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Foreign income taxes. |
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Employee contributions to private or voluntary disability plans. |
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Employee contributions to state funds listed under Contributions
to state benefit funds. |
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One-half
of self-employment tax paid. |
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| Real Estate |
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State and local real estate taxes. |
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Taxes for local benefits (with exceptions). |
| Taxes |
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Foreign real estate taxes. |
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Trash and garbage pickup fees (with exceptions). |
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Tenant’s share of real estate taxes paid by cooperative housing
corporation |
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Rent increase due to higher real estate taxes. |
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Homeowners association charges. |
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| Personal Property Taxes |
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State and local personal property taxes. |
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Import
duties. |
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| Other Taxes |
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Taxes that are expenses of your trade or business or of producing
income. |
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State and local sales and use taxes. |
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Taxes on property producing rent or royalty income. |
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Federal
excise taxes, such as telephone taxes (see Taxes and Fees You Cannot Deduct). |
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Occupational taxes. |
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| Fees and Charges |
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Fees and charges that are expenses of your trade or business or
of producing income. |
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Fees and charges that are not expenses of your trade or
business or of producing income, such as fees for driver’s licenses car
inspections, parking, or charges for water bills (see Taxes and Fees You
Cannot
Deduct).
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Fines and penalties. |
Taxes and Fees You Cannot
Deduct
Many federal, state, and
local government taxes are not deductible because they do not fall within the
categories discussed earlier. Other taxes and fees, such as federal income taxes,
are not deductible because the tax law specifically prohibits a deduction for
them.
Taxes and fees that are
generally not deductible include the following items.
- Estate, inheritance,
legacy, or succession taxes. These taxes are generally not deductible.
However, you can deduct the estate tax attributable to income in respect of
a decedent if you, as a beneficiary, must include that income in your gross
income. In that case, deduct the estate tax as a miscellaneous deduction that
is not subject to the 2%-of-adjusted-gross-income limit.
- Federal income taxes.
This includes taxes withheld from your pay.
- Fines. You cannot
deduct penalties for violation of any law, including forfeiture of related
collateral deposits.
- Gift taxes.
- License fees.
You cannot deduct license fees for personal purposes (such as marriage, driver’s,
and dog license fees).
- Social security.
This includes social security, Medicare, or railroad retirement taxes withheld
from your pay.
- Social security and
other employment taxes for household workers. You generally cannot deduct
the social security or other employment taxes you pay on the wages of a household
worker. However, you may be able to include them in medical or child care
expenses.
Many taxes and fees other
than those listed above are also nondeductible, unless they are ordinary and
necessary expenses of a business or income producing activity.
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