Question

Dear Community,I am filing my tax in State of Washington and I paid State Excise Tax for my sole proprietorship. How and where I should enter those taxes in TurboTax?

Forum|Forum|1 year ago
August 24, 2024
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TurboTax Online

Excise taxes that are ordinary and necessary for the conduct of your business should be entered on Line 23 of your Schedule C:

https://www.irs.gov/pub/irs-pdf/f1040sc.pdf

**Answers are correct to the best of my ability but do not constitute tax or legal advice.

T

taxman2011Author

Thanks, I entered into line 23 of schedule C. I had it before as a separate custom line "State Excise Tax". My question is, any deduction in this form is against your income tax based on you tax bracket, while the state excise tax I paid should be deducted from tax directly as $ to $ not % of that.

For example: I own $4000 tax and I paid $2500 excise tax. thus I should paid $1500. But the line 23 only deduct 20% of $2500 = $500 from $4000

Am I wrong?

Hal_Al

Q. For example: I own $4000 in federal income tax and I paid $2500 excise tax. Thus I should only pay $1500, in federal income tax. Am I wrong?

A. Yes, that is wrong.

Although the $2500 is a "tax", for purposes of your business tax return (Schedule C), it is only a deduction from your business income. That is, your business profit will be reduced by $2500 and you will pay tax (both federal income tax and self employment tax) on $2500 less income. So ~$500 sounds about right.