Question

Given the following​ information, would it be better for Illinois resident Salem Marcos to itemize her sales tax or her state income tax on her federal tax​ return?

	Federal taxable income	​$46 comma 700.0046,700.00
	Federal marginal income tax rate	2525​%
	State taxable income	​$42 comma 970.0042,970.00
	State income tax rate	33​%
	Total sales tax paid	​$1 comma 412.801,412.80

Assume that Salem has sufficient itemized deductions to choose itemization method over the standard deduction.

It would be better for Illinois resident Salem Marcos​ to:  ​(Select best answer​ below.)

A.

Itemize state income tax.Itemize state income tax.

B.

No difference between the two.No difference between the two.

C.

Itemize sales tax.

Answer 1

Answer is:

C. Itemize sales tax.

Explanation:

Salem Marcos state taxable income is $42,970.00

State income tax rate is 3%

State income tax = state taxable income * state income tax rate

=$42,970.00 * 3%

=$1,289.10

Total sales tax paid $1,412.80

So, It would be better to itemize sales tax paid as the amount is higher than state income tax.