[maria10]

I just finished one of the Becker practice exams and I had a question. The full question in itself is too long for me to type, but just as a general question in relation to that one multiple choice question:

There was a sole proprietor and they asked for the income that was taxable on Schedule C. The one item that wasn’t deducted was ‘state income taxes for the business’. It says that it is an itemized deduction; however, I thought that when it’s taxes related to the business, that it gets deducted on schedule C. Becker says that business state and local taxes paid are deducted on schedule C and the personal portion of the expense is on schedule A.

Can someone clarify?

Thanks!

[Roxwella]

The business pays no state/local/federal income tax (though it would pay for licenses, fees to state, etc.). Schedule C is simply a holder for a business activity on a personal return, the business is not a separate entity from its owner (unlike in a corporation). The individual pays the state income tax, and then the individual can take that as a deduction on their A.

Regarding a sales tax, usually the amount collected in sales tax is taken from the gross before any deductions (because collected sales tax isn't income). Hope this helps!

[Author]

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