This year Kelly bought a new auto for $20,000 plus $1,650 in state and local sales taxes. Besides this sales tax, Kelly also paid $8,260 in state income taxes and had mortgage interest of $5,500 ($400,000 acquisition indebtedness on her residence). If Kelly files single with AGI of $56,000, what amount of itemized deductions will she be eligible to claim?
What will be an ideal response?
$13,760 = $8,260 + $5,500.
State income taxes, but not sales taxes, are included with other itemized deductions when determining total itemized deductions. A taxpayer could elect to deduct state sales taxes instead of state income taxes. Nonetheless, Kelly would not make this election because her state income taxes ($8,260) exceed her state sales taxes.
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