 Looking at the income tax formula, we're focused down here on the itemized deductions. Remembering the first half of the income tax formula is in essence, an income statement where we have income minus the equivalent of the expenses being the deductions equals the equivalent of net income, that being the taxable income, everything, flipped on its head. We want taxable income as low as possible as opposed to normally when we want net income as high as possible. We've got the income minus the different kinds of deductions. We looked at the above the line deductions or adjustments to income in a prior section that got us to the subtotal of the adjusted gross income. Very important subtotal because that's the number often used to think about phase outs as income goes up. We've could phase out deductions and credits based on the adjusted gross income oftentimes. Then we have what might be called the below the line deductions, which is either the standard deduction or the itemized deduction. We only take the itemized deduction if it is greater than the standard deduction. So now we're focusing in on some of those itemized deductions, page one of the form 1040. It's located here, 12 standard deduction or itemized deduction. This is the schedule A, we're looking at the itemized deductions related to taxes. Remember when you're thinking about itemized deductions, what's the thing that's gonna push people over? Usually home ownership, because that's gonna have or lead to a loan, a mortgage, interests, and then also the property taxes. Those are the big two. We're looking at the taxes here, which includes one of those big two related to the home ownership that being property taxes. You gotta keep in mind the standard deduction when thinking about the itemized deductions because if they're nowhere near clearing the standard deduction, then it'll be a fairly basic, more basic return at least because you don't have to worry about all the itemized kind of deduction stuff because they're gonna be taking the standard deduction, the number for single filers 12,950, double that for married 25,900. So now we're on to the state taxes, the item, I'm sorry, the taxes, the deductibility of taxes for the schedule A itemized deductions. What if you lived in more than one state? So this is another kind of issue, of course, and it also leads to kind of thinking about what kind of clients you wanna take on again when you're thinking about building your tax. They get tax breaks to build a $5 billion stadium. Practice, if you're doing multiple returns, you wanna think, do I want more basic tax returns where I'm gonna focus on volume, do a bunch of more basic tax returns, or do I want more complex tax returns where I'm gonna do less volume but higher profit margins for those tax returns? And one of the things you can expand on is having tax returns from multiple states because that's gonna make complications in terms of the deductions here, but also they could be different state requirements with regards to income tax reporting that you'll typically be needing to do if you wanna do the federal income tax stuff as well. So do you wanna take on those kind of clients that have multiple states, people that are moving around a lot, or that have for whatever reason income subject to multiple states, or do you wanna stick to tax returns that are in a particular location that you know, sometimes tax software that you're using could differ in terms of the cost on how many states and foreign stuff, income sources and whatnot. So if you lived in more than one state during 2022, use the following steps to figure the amount to put online one of the worksheet. Number one, look up the table amount for each state using the rules stated earlier. If there's no table for a state, the table amount for that state is considered to be zero. So when we're looking at the table deduction, we're thinking about the, remember you have the, we talked about in the prior presentation, if you can deduct the state tax, some states tax on a state income tax system, and some states have the sales tax. So if we're dealing with the sales tax, then you can use actual sales tax, but oftentimes you might need to use a table to calculate the sales tax, otherwise it'd be quite tedious to kind of add up all your sales tax receipts. If you're in multiple states, then what table should you use is one of the questions that could come up. So number two, multiply the table amount of each state by a fraction, the number of which is the number of days you lived in the state during 2022, and the denominator of which is the total number of days in the year. So now this would be a common type of strategy when we have this kind of issue that would come up. Something came up. We lived in two states for a fraction of the year, so we can calculate that fraction and then apply one table for the fraction and the other table for the other fraction. So we can do a fraction problem, breaking out what percentage of the year was I, in this state versus the other state, and then use the appropriate tax tables times those fractions. So three, if you also lived in a locality during 2022 that imposed a local general sales tax, complete a separate worksheet for each state you lived in using the prorated amount from step one, I'm sorry, step two, for that state, online one of its worksheet, otherwise combine the prorated table amounts from step two and enter the total online one of a single worksheet. Now, obviously again, good software could help you out with these kinds of situations often times. Let's look at an example. You lived in state A from January 1st through August 31st, 2022, that's 243 days. And in state B from September 1st through December 31st, 2022, that's 122 days. So the table amount for state A is 500, the table amount for state B is 400, you would figure your state general sales tax as follows. So now you're gonna take the 500 from the one table and apply the fraction, which is 243 days over how many days in a year, 365, gets to the 333 and then the 400 times that same fraction. So we're in the middle somewhere here at the 467 between, I'm sorry, we're in the middle of the two, yeah, the two amounts, which was 500 and the 400 at the 467 waiting it towards the place that we spent more time using that fraction approach. That approach, by the way, is a useful kind of concept to have in the toolkit as issues like that kind of come up. So if none of the localities in which you lived during 2022 imposed a local general sales tax enter 467 online one of your worksheet, otherwise complete a separate worksheet for state A and state B, enter 333 online one of the state A worksheet and 134 online one of the state B worksheet. And then here's the actual state, local general sales tax deduction worksheet. I'm not gonna go through it line by line. You could check it out software again in practice helps us out to kind of deal with some of these issues. Line two, if you checked no box enter zero online two and go to line three, if you checked the yes box and lived in the same locality for all of 2022 enter the applicable amount based on your 2022 income and family size from the 2022 optional local sales tax table from your locality. Read down the quote at least but less than quote columns for your locality and find a line that includes your 2022 income. See the instructions for line one of the worksheet to figure your 2022 income. The family size column refers to the number of dependents listed on page one of form 1040 or form 1040 SR and any continuation sheets plus and if you are filing a joint return your spouse. So obviously when we're looking at these worksheets and they're trying to estimate like the sales tax it's gotta take into consideration the locality that you're in as well as the family size to try to get an estimate in terms of how much the average like sales tax would be to give like a generic type of deduction. And this ironically this whole approach here is supposed to be easier on people because the other way that you would have to do it is to actually track all of your sales receipts for everything that you purchased that subject sales tax. So if you are married and not filing a joint return you can include your spouse in family size only in certain circumstances which are described in publication 501. So what if you lived in more than one locality if you lived in more than one locality during 2022 look up the table amount for each locality using the rules stated earlier if there is no table for your locality the table amount is considered to be zero. Multiply the table amount for each locality you lived in by a fraction. The numerator of the fraction is the number of days you lived in the locality during 2022 and the denominator is the total number of days in the year 365 if you lived in more than one locality in the same state and the local general sales tax rate was the same for each locality enter the total for the pro rated table amounts for each locality in that state online too.