Taxes You Paid Overview 5044 Income Tax 2025 26

United States income tax looking at itemized deductions reported on schedule A section of taxes you paid whether the state and local taxes could be deductible for federal income tax purposes. So get ready and some coffee so we can lessen the sting of the IRS smack as they hit you with the income tax. Note, you can find the form 1040 instructions for schedule A tax year 2025 at the IRS website irs.gov irs.gov. Remember in the first half of the income tax formula is basically a funny income statement replacing the expenses with deductions. Two categories, the above the line deductions which we talked about in a prior section also called adjustments to income, below the line deduction greater of standard or itemized our focus this time on the itemized deduction remembering the ownership of the home is often the thing that pushes people over to be able to itemize possibly opening the door to other itemized deductions. This is going to be the tax and credits section of the form 1040 page number two 12E taking the greater of the standard or itemized deductions remembering that we have a list on the actual form of the general standard deduction hurdles we would have to clear single 15750 married filing joint double that 315 head of household in between 23625. This is the schedule A itemized deductions which we would only include generally if it added up to greater than the standard deduction which would be based on the standard deduction that is on our filing status. We're focused here on the taxes you paid section. Taxes you paid overview. Now remember we're looking at the federal income taxes. So, the first question would come up, can you deduct federal income taxes for federal income taxes? Well, no, that would be kind of weird. That would be kind of a loop. You'd end up with a with a with a circular reference. What we're talking about is can we deduct state income taxes for federal income taxes, state and local taxes? All right. So, taxes paid may qualify as itemized deductions on the schedule A. So, typically state and local taxes including state tax based on possibly an income tax, possibly a sales tax, local taxes often including the tax on real estate. So, the state and local taxes is one of the things that owning a home often boosts because of property taxes on the real estate. So, the taxes is an area often pushing people closer to being able to itemize, but it's often not state or sales tax in and of itself. It's the owning of the home which is tacking on a substantial amount of real estate taxes particularly if you're in high cost of living areas like California and New York. Common deductible taxes include state and local income taxes. Now, note that the federal tax system is different from the state. Quick overview. Federal taxes are are there mainly for defense uh of us as a unified state and they govern interstate commerce and so on. Whereas the state and local are supposed to take care of everything else at the state and local level for the most part. So, they have to collect their own taxes. They're not going to be subject to the same format of tax collection as the federal government, although they can choose that system meaning the state and local might have an income tax system mirroring the federal income tax system, but it might decide to have a sales tax instead, a consumption-type tax, and often it'll include local taxes as well, such as property taxes. Primarily, we think of the real estate as the biggest piece of property for most standard people, and that's going to be a substantial amount of possible state and local taxes. So, state and local general taxes may qualify instead of income taxes. Uh so, we run into this problem with the state and local taxes of Remember, part of the problem with the federal government and taxes in general is they would like to tax things based on a standard format for thing for the way things are done. But, things are not always done in the same way over time. So, in other words, the federal government's thinking, "Well, the states are probably just going to do a state income tax, just mirroring what we do on the federal side." But, maybe what the state is saying, "That doesn't work for us. We're independent. We want to have a sales tax system." Well, now the question is, that's going to be a little bit more difficult for us to figure out in terms of should we be able to deduct it on the federal income taxes because it's a it's a little bit different of a system. And uh so, the bottom line then is that we probably should not be having a deduction for state taxes on the federal income tax return, thereby allowing the states the freedom to do whatever they want to do, and not have this kind of interference on the federal side, and most likely it leads to subsidization, certain states wanting to take advantage of the deductibility of taxes by increasing, you know, the taxes that pass through at least in part to the federal government. Okay. So, from a practical standpoint, when we do our tax preparation, we would like to have software that has the state taxes that we're likely to be dealing with. And if you want all access to all states, that might cost more depending on the software that you're using. If you're dealing with a state that has state income taxes, that's usually a little bit easier because they're modeled after the federal income taxes. And you could see the actual payments that are being made cuz you're going to plug them into the tax software, which can then calculate the state tax. If it's a sales tax, then the question is do you want to actually add up all the taxes or use basically the tables that are provided for them to calculate the the tax on the sales tax. As far as local taxes like property taxes, then we're usually going to need the documentation for substantial taxes like that. Which we're not going to get any typical form for unless it's bundled together on the 1098, which is the real estate payments for the real estate interest. So, real estate taxes on personal residence may qualify. That's the big one. So, whether you have a sales tax system in your state or an income tax system on the state level, they usually are going to also have property taxes. And the property taxes are going to be a big one. And that's why owning a home could be the thing that pushes people over the limit, although there are caps. And they keep on messing with these caps on the amount of state and local taxes. It's a big issue between different states because it kind of looks like the some states that are high cost of living are taking advantage of higher taxes and subsidizing their state through the federal government by having these higher taxes. Personal property taxes may qualify if based on value. So now we have the personal property taxes. So So remember that most people have a home. They might not have a whole lot of other stuff that have a substantial amount of personal property taxes, but they might cuz they might have like a yacht or something. So if you're working with high-cost of living areas, there could be substantial property taxes on more than just simply uh the home, which you have to look into. So the deduction is commonly referred as to the SALT deduction. So if you've been following some of the tax conversation over the last many years, the SALT deduction comes up a lot because there's this argument between the states about what could be possibly deemed as abuse of uh the state taxes. Now the problem of course is the argument on behalf of like the high-cost of living areas, which I happen to live in one like California and New York, is well, look, that's the way it's always been. So it's kind of hard to pull that uh deduction out from under them at this point in time. It's a similar thing with the real estate taxes. Being able to deduct real estate taxes and real estate uh interest is really kind of subsidizing subsidizing the real estate market, and I don't think in the long run it would be a good thing to do because it's just going to basically even out over time as the market takes into the consideration of this more complicated system, but you can't really take it out retroactively or even going forward that easily because people have already bought their homes depending on the deduction sticking around for the life of the loan like 30 years. So you'd have to in order to change it, you'd have to say, well, we're going to fix it going forward. Meaning I'm not going You bought the home under this term just like they did with the um uh alimony stuff. They'd have to say, "Well, if you if you were under the contract before this date, we'll keep it the way it is, but going forward, we're going to try to stay out of the business of of the homes and stay out of the business of the state taxes on the federal side." I think I think that would actually be the honest best way to go, and things would equalize and get more simple over time, but not likely to to happen given the politics. SALT stands for state and local taxes. So, federal taxes are not deductible on Schedule A. So, you can't deduct, of course, federal taxes when calculating federal taxes because you'll end up with a circle reference. If you get a refund of the federal taxes, you don't have to include it in income, generally, because you didn't get a deduction for it. As with the case not with the case with state taxes where it's if you got a refund, the question is, "Well, did you get a deduction for it?" If so, then you might have to include it uh in income. Taxpayers benefit from these deductions only if itemizing. So, we have to be itemizing clearing the threshold. So, often times state taxes without real estate is not usually going to do it if you don't own the home unless you're quite high uh earner, but even then the state taxes will be capped. It's usually the coupling of the home mortgage interest, typically in a high cost of living area, and property taxes, and possibly your other taxes for the state, which would be the your income taxes or the uh sales tax, which will push people over the threshold to itemize. So, Schedule A Form 1040 instructions, uh these are the primary resources you could take a look at uh for more detail here. We've got uh the the Schedule A Form 1040 instructions for tax year 2025, Form 1040 instructions tax year 2025. you've got the IRS publication 17. Most of these you can find at the IRS website, irs.gov, irs.gov. You got IRS publication 530, uh Internal Revenue Code Section 164, IRS sales deduction tables and calculator. You've got the state and local payment records, and you've got the form 1098 mortgage statements showing property taxes. Now, the 1098 is something that you were certainly going to get if you have a standard loan that's connected to the purchase of a home. So, you purchased a home, uh you have a loan for the purchasing of the home with a standard financial institution like a bank, then that institution is usually required by the government, the government has leverage over the institution to report to you as well as to them on the 1098 the amount of interest on the loan because that is something that might be deductible on the Schedule A. Sometimes, uh when you package the loan, they will bundle that together with the payment of the property taxes, which could make it a little bit more easy because a lot of times the property taxes will be paid twice a year or maybe even once a year depending on your location. So, if you pay it like twice a year, then you might forget to pay it or it might be a a large dollar amount at that one payment time. So, sometimes the argument is it's a little bit more convenient if you use it and bundle it together with your payments along with the loan because then they can make an even monthly payment and you could just make it part of your monthly payments. So, that might be more or less costly, so you have to because if you if you pay it when it's due, uh then then maybe that would be cheaper, so you kind of have to think about exactly what your loan structure would be best, but however but that means from a data input standpoint, it's possible that the property taxes will be mapped out as we get the 1098. It'll give us that information. It'll break that information out, but it's possible that it doesn't uh because someone might elect not to do it that way and just pay the property taxes straight to the to the state, uh in which case you're going to have to get the documentation for the property taxes. Okay. So, state and local income taxes, state and local income taxes paid during the year may uh be deducted. So, amounts without uh withheld from wages may qualify. Now, on the state and local taxes, then if you have an income tax, then it's probably going to be mirroring the federal income taxes. That means that the whole payroll system that we have with federal income taxes will kind of be mirrored to some degree with the state, and that means that you're going to be filing like the equivalent of the W-4, or they might just use the W-4 as an employee to determine your withholdings, not only for federal income taxes, but also for state income taxes, which means that when you get your paycheck, they've already withheld money for state and federal taxes, paid it to the governments, both the state and federal, and uh so that means that when you enter the W-2, then it's all taken care for of for you already. We just do the data input just like we do with the federal income taxes. The same concept also applies in that they're going to shoot for a little bit overpayment so that you end up with a refund so that the state doesn't hit you with uh uh penalties and interest for underpayment. So, that's what we would kind of expect to see. That means that when we get the deduction, we're usually basically on a cash based system. We made the payments during the year, when the payments were taken out of our check, that's when we get to deduct them. Even if we made estimated tax payments, we might have made an estimated tax payment in the following year, like 2026, applying it to 2025. In that case, usually we're still on a cash based system, meaning even though we applied that payment to 2025, we made the payment in 2026. So, on a cash based system, you would think that we wouldn't have the deduction until 2026 when we made the payment. Now, this also leads to some issues of could you try to use the cash based system to manipulate your deduction? And you could maybe to some degree, but remember that the income taxes are what the income taxes are. So, if you overpay, that if you try to get a bigger deduction by overpaying the the income taxes, you might be able to get a deduction, right? But then when you get the refund, you're going to have to include it in income uh next year if you got a deduction for it this year. So, you have kind of a timing difference, uh and you have to be careful, you know, in in in that in that as well. So, estimated tax payments may qualify. So, if you have a schedule C type of business, you're not a W-2 employee, you might have to make estimated tax payments. Or if you're retired, you might have to make estimated tax payments. So, that's when you would actually have to make four payments typically to the government as the year passes. And similarly to the state government, and those payments that you make to the state might be deductible on the schedule A. So, prior year uh state tax payments made during the current year may qualify. So, now this is the cutoff problem. So, you made estimated tax payments. The last estimated tax payment for the last quarter of 2024 might have been made in 2025. So, this causes a problem for us when we try to do the tax preparation because there's the cutoff becomes kind of confusing because when we're trying to think about did you make the payments sufficient for tax year 2025, for example, then one of the payments might have been made in 2026 uh quite often, but we applied it to 2025, and so as long as the government does that, too, the state in this case, we're good. And then the question is, well, what about the deduction? Do I Do I get to deduct that one made in 2026 in in tax year 2025 or 26? Well, usually on a cash base system, it would be made It would be deducted in 2026. So, you have this difference of of like the the actual state taxes that are calculated by the software are going to be the state taxes that you owe for tax year 2025. The estimated tax payments that you made that are applied to tax year 2025 were probably made, if they're estimates, in 2025 and 2026, January of 2026, right? And then And then the amount that you can deduct for state income taxes, if you made estimated payments, are usually going to be payments that were uh made into They were made in 2025, but include payments that were applied to tax year 2024 because the last quarter of 2024 was paid in 2025, right? So, that cutoff thing can be kind of confusing. It's not going to happen uh if you have W-2 and employee or W-2s, uh and that's how they made their payments because then you just take out the amount as they earn throughout the year. It's only when they have like a schedule C business, you have this cutoff issue, uh, which becomes confusing and in terms of applying the payments out. Okay, payments made with state tax return, uh, may qualify. Uh, refunds of state So, obviously, if you made the payment as you file the tax return, again, it would generally be in the year that you filed the tax return. Refund of state taxes may impact future reporting. So, now you got a refund of taxes. Remember the general rule with the state refund is we're always going to get a state refund if it's structured like the federal income tax cuz our goal is to overshoot it in order to get a refund so that we don't undershoot it, in which case we get hit with penalties and interest. So, if we get a refund, then as we saw on the income side, the question is did I get a deduction for for it last year? Uh, so if I got a refund in 2025, did I get a deduction for it in 2024? If I did, I might have to include it in income, although there's there's variations, uh, of how much I would have to include that we talked about before, which tax software can help with, uh, as long as you're using the same software and rolling it over from year to year. Taxpayers generally deduct taxes actually paid during the year, meaning cash-based system. So, taxes, uh, connected to business or rental activity are generally deducted elsewhere. So, you could have taxes that are like part of your business, right? So, if you have property taxes, but the property is a lawn mower or or whatever equipment, construction equipment, or whatever for your business, then you should get the deduction, but it shouldn't be deducted on the schedule A, you would think. It would be an ordinary and necessary business, uh, type expense. So, if the taxes that you incurred at the state and local level were normal taxes for ordinary and necessary business expenses for like a schedule C type of business as a sole proprietorship or for a rental property, you would think you would report it on the schedule C or the schedule E. If the state and local taxes are for personal property, like the home or your your yacht or whatever or or uh the state taxes for your personal self, uh then you would think possibly you get a deduction on schedule A. So, state income tax system. Many states use an income tax system similar to the federal system. So, in California for example, they mirror the federal system uh a lot, although they tax you know, the California taxes everything. We get all taxes all over the place, but uh but we have a a state income tax. So, that means when I file my return, it's a little bit easier as long as the software is doing both the federal and state tax at the same time. State uh taxable income often begins with the federal adjusted gross income. So, instead of starting from scratch, it might say, "Hey, look, do the federal income taxes first, and then we're just going to work off the federal income taxes and adjust the federal income taxes based on whatever state differences there are to figure out the state taxable income." Right? Why re There's no need to re re-work the system. You could start at the base of the of the federal tax and then make adjustments as needed. So, states may apply their their own deductions and credits. Uh taxpayers in high-income tax states may reach the SALT cap quickly. So, if you're in California or New York, the SALT limits uh could cap the amount of state taxes that you could take. That's where the big fight uh is often times. Uh state income tax withheld commonly appears on form W-2. So, if your state taxes were paid by the W-2, it's usually pretty straightforward cuz it's all been done for you. It's all in the same year and we could just enter the W-2 and the question is, were those withholdings sufficient? If they were, good. Is next year the same? We can keep it going forward. If they were not sufficient, maybe we need to do an estimate to adjust the withholdings for next year. Uh or is there a substantial change in income or tax status, house, marriage, children that might change the withholdings? Self-employed taxpayer may make quarterly estimated state tax payments. So, we talked about that. If you have a Schedule C business, you might have to make the estimated tax payments. So, some states have flat tax systems while others use progressive uh rates. So, you could say if are they more or less progressive in terms of their tax structure on the state level. A few states have no state income tax. So, this became a problem because what if a state has no income tax? Does that mean that they don't like uh they don't do anything? Like they don't have police officers and schools and stuff? No, that means that they're going to have to get their income through some other means. Like they get the property taxes off obviously, but they might have a sales tax system, which is a consumption tax. State and local general sales tax. So, taxpayers may choose to deduct sales tax instead of income taxes. Now, remember anytime you deviate, the problem with regulation, which is what taxes are to some degree, they're necessary to some degree, but they could become overburdensome, is that they try to they try to box people in in a certain system. And you're like, "No, wait a sec. I have an inventive I have an inventive way of doing things that I think would improve, but you can't do it because the taxes want you to do it a specific way so you can calculate the taxes. So you could see that happening here. So the the the federal taxes are system was basically set up saying, "Well, dude, just do the state taxes the way we do the federal taxes. We could just file the the return at the same time and time together. It'll be easy." But some states are like, "No, cuz I don't want to tax my citizens that way. I I I feel like I it would be better if we did a a a consumption tax." And you might say, "Why don't you just follow?" Because if it actually is better, we should we should allow the states to test it, right? So that So the states should be allowed to test their own taxes. That's why I don't think it should be deductible at all cuz the federal government is is getting into the state's business. But then the question is, "Well, if if you choose a different tax system, how are we going to figure out the deductibility on uh the federal taxes, right?" So this became a debate way back when uh and it's still again, it's still kind of an issue because because like I said, I don't I don't think we should be deducting state taxes on the federal tax I don't know I don't but anyway, taxpayers cannot deduct both income taxes and sales taxes. So if you're in a state that has both, California, then we could then you have to choose like one or the other. Usually, if you're in a state that has both sales tax and income tax, the income tax is higher unless you happen to buy a yacht that year or something, you know, you have this massive amount of sales tax. So the deduction is often beneficial in states without income taxes. So if you don't have income taxes, that's why they really put that in the system because they're getting ripped off. They're getting totally They were getting totally ripped off if you if you if you choose not to have the the income tax, right? So the IRS provides optional sales tax tables. The problem with sales tax is you can add up all the sales tax that you've ever spent over the year, every time you bought a cup of coffee, that's a problem though. The So, they're going to have to state sales tax tables where you can just basically take the generic sales tax for the year, which you would think would be fine, unless, again, you made a substantial purchase like a yacht in that year, in which case you got a ton of sales tax. So, taxpayers may add certain large purchases to uh table amounts. So, examples of large purchases include like vehicles, boats, uh home building materials, and so on. Taxpayers may use actual receipts instead of IRS tables. So, from from our perspective as a tax preparer, if someone is in a state where there is an income tax, then we're usually going to use that unless they've made this huge purchase and we're like, "Whoa, wait, maybe we should check that out. You made this giant purchase, maybe the sales tax is actually higher than the income tax." Although, they probably hit the SALT tax any either way if they're making those big purchases in a in a high income but but if if they're in a if they're in an area a state that doesn't have state income taxes, then it's probably safe just to use the tables uh for the sales tax calculation because that's usually that usually works fine and it's less burdensome. But, if they made a big purchase, then we want to think, "Okay, hold on. It's worthwhile to to to to dig down here and and look at the look at the look at the actual numbers rather than taking the table number." So, good record keeping is important when using actual expenses. Uh states that rely more on sales taxes. Some states rely heavily on sales tax instead of income taxes. Taxpayers in these states often elect the sales tax deduction, of course. States uh with no income tax may still generate SALT deductions through sales tax. Large consumer purchases may significantly increase deductions. As I discussed, IRS sales tax tables vary based on income and family size. Local sales taxes may also be included. Taxpayers should compare income tax versus sales tax. Now, if you have to compare those two, then of course software is quite helpful for doing those comparisons. The larger deduction generally provides the greater tax benefit. Obviously, the bigger deduction typically wins. Real estate taxes. Real estate taxes on personal residence may be deductible. So, that's the big one when we think about real estate taxes, you're typically thinking about on the home. So, that's why the home is the thing that could be pushing people over the hurdle of the standard deduction in order to itemize in the first place. Taxes must generally be imposed for the general public welfare. Charges for local benefits are are generally not deductible. So, you can't say that you got taxed be and and then but you're getting a local benefit from it, right? The obviously the whole point of the deductibility of the taxes is that you're paying taxes for the general benefit of the public welfare. It's being used for schools or something. Deductible taxes are commonly based on assessed property value. So, they're going to assess the value of the property as the basis on which to calculate the tax. Property taxes are often reported on form uh 1098. So, you might get a form 1098. If you don't, then you're going to have to uh calculate the tax as we talked about before. Uh escrow accounts may pay property taxes on behalf of the homeowners. Taxpayers generally deduct taxes actually paid during the year. So, that could lead to some limited tax planning because you might be able to influence a little bit uh the the tax year that you that you make the payment, although the IRS isn't going to let you go extreme on that. Uh meaning like like could I make an extra tax sales tax or a real estate tax payment in the current year if I think the deduction would benefit me more in this year than next year? Well, if it's a cash base system, you would think that if you made the payment in this year, even though it's for the tax that is technically in the following year, then you would think that would be okay. That's how you can kind of manipulate the the the timing difference uh if you're on a cash base system, but you have to be careful that you don't take that to extremes cuz the IRS is going to going to monitor, you know, not anyway. So, vacation homes may also qualify for property tax deductions. Non-deductible real estate charges. So, real estate becomes confusing because now we get this question of what what qualifies as a sales tax, what does not. Charges for special local improvements are generally not deductible. So, you got special things. So, examples include sidewalks, sewer lines, water mains. HOA fees are generally not deductible. Uh utility service charge charges are generally not deductible. Trash collection fees may not qualify as deductible property taxes. Special assessments for local benefits are usually uh capitalized uh instead. Special assessment for local business could be capitalized for the assessment if you're building something. Capitalized improvements may increase property taxes. In other words, if you build another room in your home, then that's most likely, if they assessed your property, going to increase the value of the property and the property tax is based on the uh estimated value of the property. Uh taxpayers should distinguish taxes from uh service charges. Personal property taxes. Personal property taxes may qualify if based on value. Taxes must generally be imposed annually. Vehicle license fees uh based on vehicle value may qualify. So, this often comes down to personal property taxes like your automobiles. If uh you get the DMV fees in terms of the property taxes, uh you might have a deductible portion of those fees. Flat registration fees generally do do not qualify if it's just a flat registration because that's a flat fee that's not based on the property va- State varies significantly in how vehicle taxes are structured. So, once you get the system down in the state that you're in, then you get the system down. It's going to be a little bit more confusing if you're doing multiple state returns because of the differences in the taxation between different state. Taxpayers should review annual annual registration documentation carefully. Uh deductible portions may be separately identified on billing statements. So, often times you have a deductible and non-deductible portion, which always got kind of confusing uh what part of the DMV payments are deductible. And so, hopefully they can they can break that out a little bit more easily depending on your location. Personal property taxes are included within the SALT limitation. The SALT deduction limitation, state and local deductions are subject to federal limitation. Believe the cap in 2025 is at 40,000 for single, married filing joint, and head of household, which is a little unusual because you kind of expect it to be half that for single. It's not half it for single, but is for married filing separately. That's usually where we have that weird difference cuz if you're married, you can't really go back to to single typically, and the married filing separately often has uh limitations on it. The limitation applies to the combined total qualified taxes. So, whatever qualifies in terms of the real estate taxes, the sales tax or the state tax and the personal property taxes, adding those together and then we cap it at generally that 40,000, I believe. Property taxes and state taxes are combined for the limitation. Many taxpayers in high tax states reach the limitation quickly. So, this again is something that's going to be fought over a lot. The limit the the limitation before was lower when Trump first put this in in his first administration. I believe that's when it was the 10,000. So, the limitation significantly impacts homeowners in high cost of living areas. So, there's a there's a battle between the states that about this because the states the higher cost of living, of course, want the higher deduction, but the low cost of living, they feel like the high cost of living states are basically subsidizing with these taxes. So, the SALT cap has been a major federal tax policy issue. So, high tax state consideration. So, taxpayers in high tax states may lose deduction due to the SALT cap, of course, like California and New York. High property taxes can consume most of the deduction limitation. So, state income taxes may push taxpayers above the limitation quickly. So, when you combine together expensive houses in high cost of living areas with high cost of living taxes for the people are high earners, that could push you over quite quickly. Homeowners in expensive housing market are are commonly affected. So, tax planning may involve timing certain payments. So, in other words, because we're on a cash based system, you might be able to time when you pay the taxes in order to try to manipulate the ability to not hit that cap. So, in other words, could I nudge a property tax payment outside next year or pull one in to the current year, so next year I I will be more likely not to to hit the cap. So, married couples may experience limitation concerns despite combined filing. In other words, we have one cap for single and marriage. You would think it would be like doubled if you were married or something, right? Although, again, you only own one home typically. Might been the the thought process, but taxpayers should evaluate whether itemized still exceeds the standard deduction. SALT taxation may reduce the federal tax benefit on uh home ownership. And I think that's kind of the point because I I kind of feel like if they got out of the home ownership subsidization, then the prices of the homes would ultimately go down because the prices have been increased due to the benefits that they're trying to give to home owners, which does impact the market in the short run, but in the long run, it just leads to complications, it seems to me, in terms of how you calculate the the actual value of the home, making it more difficult, not easier, for the home purchasing. So, timing of tax payments. Taxes are generally deducted in the year paid, cash basis. Escrow payments are not deductible until until actually paid to the taxing authorities cuz the escrow is like a holding account. It hasn't It's in the intermediary. It hasn't really the deal might fall through at that point. So, so, estimated uh state tax payments are deductible when paid, cash basis again. Taxpayers should maintain records of payment dates. So, clearly, this is more easy these days with the electronic transfers, often the way to go. Pre prepaid taxes may be limited under federal rules. So, be careful. We talked about these timing differences. Be careful with the timing differences because the government will, you know, limit that because you can't get carried away and say I'm going to pay all the property taxes for like the next 5 years or something this year because for whatever reason I I think I could I can get a benefit from it this year, you know, because now you you're taking the timing differences that you could do with a cash base system and you're overdoing it and the IRS is going to limit that prepayment. So more So mortgage commonly provide annual escrow summaries. So electronic payments confirms may support deduction. So electronic payments are great because they tell you more information than we used to have with basically checks and whatnot. So they So that's that's good for an audit trail. Timing deficiencies can affect itemized deduction planning. So record keeping requirements taxpayer should should retain property tax bills. You got that form 1098 of course for the real estate taxes often also applying to the to the interest state tax returns may support income tax deductions. So obviously you'll have to state income taxes with the federal income tax. Payroll records may support state withholding amounts W-2s and whatnot. Vehicle registration statement may support personal property taxes. So you get that from the DMV or whatever. Sales tax receipts may support actual sales tax deduction. So if you bought the yacht you're taking a sales tax deduction then make sure that you have the paperwork on that which I'm sure you would it's a big purchase but IRS sales tax tables should be retained if used. So software usually helps for that. Good documentation supports audit readiness meaning if they come back 3 years later you want to be ready. Common audit and compliance issues. Deducting federal income taxes. You can't do that. You can't deduct federal income taxes on the federal tax return. Deducting both sales tax and state income tax. You have to pick one. One or the other. Software helps to do that properly. Including non-deductible fees and assessments. Typically on the automobile, try to deduct all of it is a common practice, but you're supposed to only deduct part of it. Claiming taxes not actually paid during the year. So, possibly because you're messing up the timing of when the payment what year it was applied to versus the year it was paid. Deducting business taxes on schedule A instead of business schedules. Uh mis- misclassifying HOA fees as property taxes. Exceeding the SALT deduction limitation. Poor substitution of sales tax deduction. So, tax planning considerations. Taxpayers should compare standard deduction versus itemized, of course. Timing the state estimated payment when impact uh when impact deductions. So, make your your estimated payments properly uh and think about not only making them in time so you don't get hit with penalties and interest, but also thinking about the deductibility of the state estimates on the federal return. Timing of property tax payments may affect tax planning. Again, you have some leeway on a cash base system, but you have to be careful on the prepayments which could be limited to maximize your tax benefit. Large purchase may increase sales tax deduction. So, when you make that large purchase, think about the SALT cap and whatnot when you buy that yacht or whatever. Home ownership often increases itemized uh deductions. So, it shouldn't be the thing that determines if you want to buy a home or not. Taxes shouldn't be the thing, in my opinion. But, it's obviously something to consider, right? Uh and it muddies up the the whole the whole question. High-income uh taxpayers commonly monitor SALT limitations closely. So, state tax uh structure significantly impacts deduction strategies. So, different states are going to have different strategies cuz they have different tax structures. Record keeping impacts tax planning opportunities. Key takeaways, taxes paid are a major category of schedule A itemized deductions. State income taxes or sales taxes may be deductible, but not both. Real estate taxes are commonly deductible for home owners. Personal property taxes may qualify if based on value. High-tax states are more heavily impacted by the limitation. Property documentation is critical for a compliance and taxpayers should evaluate whether itemizing provides a greater benefit, of course.