What's the Difference Between Deducting State Income Tax and State Sales Tax?

When itemizing deductions, you can deduct either your state income tax or your state sales tax, but not both — you choose whichever gives you the larger deduction. For most people in states with an income tax, deducting state income tax is the better choice because the amount is simply what you paid during the year. The sales tax deduction is more appealing for people in states with no income tax, like Texas or Florida, where the IRS provides optional tables based on your income and family size to estimate annual sales tax paid. Both options are subject to the $10,000 cap on state and local tax (SALT) deductions that applies to combined property taxes and either income or sales taxes. If you made a large purchase during the year — like a car or boat — you can add the sales tax on that item to the IRS table amount for a larger total.