Increasing the Sales Tax Deduction

[Kram BergGold]

I know the income limit for using the chart to compute the sales tax deduction is $200,000. Can one add the amount excluded from tax from the sale of a principal residence to ones income, for the purpose of computing the amount of sales tax that is deductible on Schedule A? I can neither find that it is countable like tax exempt income nor can I find that is is not includable.

[Roland Slugg]

On the IRS web site there is a link in the instructions for Schedule A (Form 1040) to a "Sales Tax Deduction Calculator." There you will find a slightly longer list of the allowed additions to income for the purpose of finding the correct sales tax deduction from the chart. That list says the following:

Your income is the amount shown on your Form 1040, "Adjusted Gross Income" line, plus any nontaxable items, such as the following:

Tax-exempt interest
Veterans' benefits
Nontaxable combat pay
Workers' compensation
Nontaxable part of social security and railroad retirement benefits
Nontaxable part of IRA, pension, or annuity distributions. Do not include rollovers
Public assistance payments
And any other nontaxable items

I believe the last item in the above list would logically "include" the "excluded" gain on the sale of a personal residence. After all, if it was rental property, the gain would be recognized, and it is only excluded from taxation because of Code §121.