How to deduct state and local sales tax in Lacerte

Taxpayers have the option of deducting state and local sales taxes, instead of state and local income taxes, as an itemized deduction on Line 5 of Schedule A.

Lacerte automatically optimizes between the greater of sales tax or income tax. To override the optimization:

1. Go to Screen 25, Itemized Deductions
2. Scroll to the Taxes section.
3. In the input box labeled 1 = force income tax, 2 = force sales tax, blank = optimize enter 1, 2, or leave blank.

To calculate the deduction:

To calculate the state and local sales tax deduction, a taxpayer can use actual expenses or the Optional State Sales Tax Tables.

Lacerte automatically optimizes between state and local sales taxes paid, and taxes calculated using the table method. To override the optimization:

1. Go to Screen 25, Itemized Deductions.
2. Scroll to the Sales and Use Taxes section.
3. In the input box labeled 1 = force actual, 2 = force tables, blank = optimize enter either 1, 2, or leave blank.

For more information on calculating sales tax deduction using the Sales Tax Tables, refer to the IRS instructions for Itemized Deductions and the IRS Sales Tax Deduction Calculator.