State and Local Taxes
If you make estimated income-tax payments, mailing
the fourth-quarter installment by December 31 earns you the
deduction in the current year - even if part of the payment is
returned to you via a state tax refund the following spring.
However, the payment has to be based on a reasonable estimate of
your actual state-tax bill. You can't inflate your fourth-quarter
payment just to hike the write-off on your federal return.
You may have similar flexibility with state and local property-tax bills. In some areas of the country, these bills are mailed out in the fall, for example, but they don't have to be paid until January of the following year. Beating the deadline by paying before year-end lets you claim the tax savings a year earlier.
You may have similar flexibility with state and local property-tax bills. In some areas of the country, these bills are mailed out in the fall, for example, but they don't have to be paid until January of the following year. Beating the deadline by paying before year-end lets you claim the tax savings a year earlier.
Please Note: If you are
subject to the alternative minimum tax (AMT), prepaying taxes may
result in no tax advantage. If you are subject to the AMT, contact a
qualified tax professional to help you determine the best time to
pay your taxes.
More on State & Local Taxes
Frequently Asked Questions
If I live in one state and work in another, for which
state do I have to file a return?
In most cases, you will file returns with both states
and claim a credit on your resident state return for tax paid to the
other state. But if the two states have a reciprocal agreement, you
generally will file a return only for the state in which you live.
Is the sales tax on the purchase of a new vehicle tax
deductible?
If you itemize deductions and elect to deduct sales
tax in lieu of state income tax, you can include the sales tax on a
new vehicle. If you use the sales tax figure in the IRS tables, you
can add sales tax on the vehicle to the figure from the table.
If I'm getting a refund from my state return, do I
need to file an extension?
The requirements vary by state. Some states require
an extension only if you do not request a federal extension. Others
require an extension even if you request a federal extension. A few
states do not have any provision for extensions. In addition, some
states impose a late-filing penalty even if a refund is due. Contact
your local H&R Block tax professional if you have questions.
